Why China Has Stopped Buying Gold?

China Halts Gold Purchases for Third Consecutive Month

China has stopped its gold purchases for the third month in a row, following a record level of precious metal holdings.
The gold bars held by the People’s Bank of China remained unchanged at 72.8 million troy ounces at the end of last month, according to official data released on Wednesday.
This marks the third consecutive month without reported purchases: the central bank concluded a 18-month buying spree in May that helped bolster gold bars.

Implications of Beijing’s Strategy on Gold Prices

Beijing’s current halt in purchases sheds light on interesting details about the gold price trends and potential future developments.
The fact that the PBOC is refraining from buying gold suggests that the soaring prices of the metal are dissuading central banks worldwide.

Singapore even reduced its gold reserves in June by the largest amount since at least 2000, and the World Gold Council stated that state-driven demand in the second quarter plummeted by 39% compared to the first three months of the year.

However, as suggested by Bloomberg, some analysts believe that central bank purchases will continue to be a key factor for gold, stating that China is likely to resume purchases in an attempt to diversify reserves and shield against currency weakness.

Record Gold Prices and Changing Market Dynamics

The precious metal reached an all-time high in July as traders increased bets on the Federal Reserve’s monetary easing.
In China, high prices have dampened retail sales of discretionary items like jewelry, but gold bars and coins are becoming increasingly popular as investors seek to safeguard their wealth from a weak economy.

According to the World Gold Council, strong purchases of physical gold, particularly by family offices in Asia, have contributed to the gold demand registering its best second quarter in at least 25 years.
The evolving dynamics of the gold market point towards an interesting future for this precious metal.