China, the biggest hoarder of gold in recent years that has gone into hibernation following a record surge in the prices of the yellow metal, is likely to resume its acquisition spree once the price settles lower, major industry observers have said.
The chief executive officer of the World Gold Council, David Tait, told the media recently in Singapore “China’s data did show a pause, they are just waiting and watching. If prices correct to the $2,200 per ounce level, they will resume again.”
“China is expected to buy more,” said KL Yap, chairman of the Singapore Bullion Market Association.
“The fact that China’s gold buying was minimal in April, and in May it was zero, does not imply by any stretch of the imagination that they are not going to start reporting again,” Rhona O’Connell, an analyst with Nasdaq-listed financial services firm StoneX said.
Peak rate on May 20
In April, gold prices reached $2,265 per ounce. On May 20, gold rates peaked at $2,449.89 an ounce. Among the triggers were expectations that the US Fed could cut rates and demand from central banks. This rate forced PBoC to retreat from the market.
How China slowed down
Having purchased 225 tonnes of gold in 2023, the People’s Bank of China (PBoC) emerged as the biggest buyer. Incidentally, PBoC’s purchase was 14 times more than what Reserve Bank of India bought last year.
In April 2024, as the prices of gold reached the peak, China slowed down buying and halted the purchase in May, which was a departure from the previous 18 months when it bought gold every month.
While China purchased 3.9 lakh ounces in February, the amount fell to 1.6 lakh ounces in March and 0.6 lakh ounces in April and nil in May.
Significantly, the drop in prices in gold this week was partly attributed to the halt in Chinese purchases that pushed up the demand globally. Then announcement of strong US hiring strengthened the US dollar which also led to the declining prices in gold.
Impact on India
After China stopped buying and US labour department hiring data firmed up the dollar, gold prices went down in India too and major jewellers said that customers were gradually returning to the stores. They were not only buying jewellery but also investing in coins and bars.
If China resumes buying as it did in 2023, it will again push up demand for the metal in the global markets and, as a result, prices will rise in India too.
While the price of 24-carat gold went past the psychological Rs 75,000 mark (for 10 gms), it eased down to Rs 66,140 for 22-carat and Rs 72,150 for 24-carat.
China has been the biggest hoarder of gold in the world recently. Though it halted purchases in May, its central bank will resume buying as soon as the price comes down again. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
