The People's Bank of China is showing its commitment to gold, as evidenced by their recent purchases that brought their total holdings to 2,010 tons. December's increase of 30 tons marked the second consecutive month of purchases, signaling a shift in focus. It has been almost three years since the last reported gains back in October 2016, so this certainly appears to be a significant development that could have large implications for the global gold market. Analysts are now keeping a keen eye on the movements of China -- it may be worth watching to see if these trends continue.

China Purchases 30 Tons of Gold in December

Bullion purchases by central banks soared to a record high this past quarter, and with only a quarter of buyers being actively identified, market speculation was rife. To the surprise of many, it was recently revealed that China was the mystery buyer driving up gold's price - the timing of this disclosure tying in perfectly with Zoltan Pozsar’s thesis that gold is being acquired as a hedge against economic volatility. This news also comes just after Russia has reached nearly all-time highs of their own gold holdings, which could be seen as further indication of what may be coming on a larger scale. It will be interesting to see if other countries follow suit and stock up on bullion in an effort to mitigate inflationary pressures related to geopolitical and financial turbulence.

Gold Chart

China has long been one of the world's leading traders, and its recent expansion in foreign currency reserves is a sign of the nation's continued economic prosperity. According to Saturday's report by the People’s Bank of China, the reserve grew by $10.2 billion from November to December, totalling an impressive $3.13 trillion. This is part of a larger trend amongst Asian nations to prepare for uncertain economic times by building up their war chests with foreign currency funds. With a weakened US Dollar, this move makes sense for China as it looks to keep control over its own financial future.

Last December was a strong month for gold buyers on the open market, with China likely standing out among them. According to the World Gold Council, central banks bought a net total of 50 tonnes in December — 47 percent more than what had been purchased in October. A closer look at which banks were involved revealed that three accounts for gross buying of 55 tonnes; two accounts for gross sales of 5 tonnes, however, pointed to just how dominant the demand for gold remains. Clearly, there is still a powerful draw when it comes to investment in yellow metal by major financial institutions.

China Gold

The record purchases of gold by central banks has been one of the highlights of the gold market in 2022, having bought a net 673t between Q1 and Q3. Looking ahead to the full year picture, it's likely  that central banks accumulated a multi-decade high level of gold in 2022, a number which will be revealed officially in mid-January. 

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