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China's central bank bought more gold in August than in any single month since 2023, and the metal still can't hold above $4,400 an ounce.
The People's Bank of China added 650,000 troy ounces, roughly 20 tonnes, to its reserves last month, according to data the central bank released Monday. That tops July's 640,000-ounce purchase and extends the PBOC's buying streak to 22 consecutive months, the longest run since China began disclosing monthly figures.
Total holdings now stand at 76.73 million troy ounces, up from 76.08 million in July. The reported value of China's gold jumped to $350.08 billion from $306.35 billion a month earlier, though most of that increase reflects gold's own price gain rather than new tonnage. Gold now accounts for close to 10% of China's roughly $3.4 trillion in foreign exchange reserves, still far short of the 60% to 70% share held by the Federal Reserve and other major Western central banks.
The freezing of roughly $300 billion in Russian central bank reserves after Moscow's 2022 invasion of Ukraine convinced reserve managers everywhere that dollar assets can be shut off with a phone call. Gold sitting in a domestic vault can't be. Gu Fengda, chief analyst at Guoxin Futures, called China's accumulation “a highly strategic and forward-looking deployment” of its reserves, not a bet on where gold trades next week.
The World Gold Council's tally for the second quarter showed central banks added a record 288.9 tonnes, up 62% from a year earlier. Poland led with 51 tonnes, pushing its reserves toward a self-set 700-tonne target, while Uzbekistan, Kazakhstan, Jordan and the Czech Republic also added. Turkey, the biggest seller earlier in the year, mostly stepped back.
Gold itself has had a rougher few weeks. The metal rallied nearly 10% in August, its best month since January, after the U.S. Treasury said Aug. 19 it would at least double buybacks of long-dated bonds, to $4 billion per operation, following a spike in 30-year yields to their highest level since 2007. Traders read the move as Washington flinching at its own borrowing costs, and the dollar sold off in what Wall Street has dubbed the “debasement trade.”
That trade has since cooled. Gold traded near $4,395 to $4,428 an ounce Monday and Tuesday, pressured by stronger-than-expected U.S. jobs data that pushed the odds of a Federal Reserve rate hike at the Sept. 15-16 meeting to nearly 60%, according to the CME's FedWatch tool. Higher rates raise the opportunity cost of holding bullion, which pays no yield.
That's the split gold is trading on heading into next week's Fed decision: traders pricing in a possible hike within days, and central banks like China's still buying on a timeline measured in years.
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