Gold prices soar, China may buy heavily to stockpile

Gold prices are at their peak, but that doesn't seem to stop the 'sharks', the central banks of countries, from buying gold whenever prices correct. China has been buying gold heavily over the past three years and may be secretly buying more of the metal.

The People’s Bank of China (PBoC) has been steadily buying physical gold to add to its national reserves, according to MarketWatch. Speculation is growing that the country may be secretly buying more of the precious metal as part of a strategy to reduce its dependence on the U.S. dollar.

Buy gold continuously

This is believed by many investors in the context that gold prices seem unlikely to fall sharply, although there are times when many factors work against the upward trend of gold.

In the past two months, the price of gold has only dropped to the threshold of 3,300 USD/ounce before rebounding and heading towards the threshold of 3,350 USD/ounce. For a while, the strong supporting factor for gold - the instability in the Middle East - has gradually subsided and is no longer mentioned much. The return of stability in Syria has opened up a prospect of stability and development for this region.

However, gold prices still rebounded quickly whenever profit-taking pressure increased. Some gold ETFs have recently sold heavily but gold prices still did not break through the $3,300/ounce threshold.

In the evening session of July 18 (Vietnam time) on the New York market, the gold price jumped to the threshold of 3,360 USD/ounce.

China and central banks of many countries continue to increase gold purchases. Photo: KC

The PBoC began to ramp up its gold purchases in early 2022, when the Russia-Ukraine conflict broke out, says Jan Nieuwenhuijs, an expert at Money Metals. At that time, the West froze Russia's foreign exchange reserves (in dollars and euros). Fearing the possibility of the US dollar being weaponized, foreign central banks bought gold in record amounts.

According to the World Gold Council (WGC), in 2022, for the first time in many years, the PBoC published a report on the increase in gold reserves. However, this figure was given by the PBoC itself, while collecting accurate data from China is a challenge due to confidentiality.

Money Metals Chairman and CEO Stefan Gleason said it makes sense for China to limit information disclosure.

“Ultimately, it is not in any buyer's best interest to take actions that make their purchase price more expensive than it needs to be,” he said.

The PBoC reported a total of 62 tonnes of gold purchases in November and December 2022, bringing its total gold reserves to more than 2,000 tonnes for the first time. In 2023, the PBoC became the world's largest central bank buyer of gold, adding 225 tonnes to its gold reserves, bringing its total gold reserves to 2,235 tonnes, the WGC reported.

In 2024, the People's Bank of China purchased 44 tonnes of gold, of which 29 tonnes were purchased between January and April. The PBoC then did not report any changes in gold reserves until gold purchases resumed in November 2024. By the end of 2024, the PBoC held 2,280 tonnes of gold, accounting for 5% of total international reserves.

Gleason said China and other countries want to reduce their dependence on the dollar. In addition, the global trade war has shown that the US will withdraw from international trade, so "other countries have less reason to hold so many dollars."

China may be holding 33,000 tons of gold

Asked whether the PBoC might be buying more gold than it is reporting, Joe Cavatoni, market strategist at the WGC, said there was a discussion in the market about "whether the purchases are being fully reported by the PBoC?".

However, he also admitted that "there is likely more going on than what is being reported".

Currently, the US is still the country with the largest gold reserves (according to official announcement) with about 8,100 tons, followed by Germany (about 3,350 tons), Italy (2,450 tons) and France (2,440 tons). Russia owns 2,300 tons.

In a report in late 2023, Dominic Frisby, founder of FlyingFrisby (a London-based organization specializing in investing in markets, including gold), predicted that the amount of gold held by China is 10 times higher than the publicly announced figure. Accordingly, China may be holding 33,000 tons of gold, equivalent to about 3,300 billion USD (at current prices).

Frisby said China has big ambitions. As the world’s largest producer and importer of gold, Beijing’s motto is “don’t shine too brightly.”

Frisby calculates that China has mined about 7,000 tonnes of gold in the 21st century. More than 50% of China’s gold mining is done by state-owned entities, and the country does not export the gold it mines. All of it is stored domestically.

On the import side, there are no exact figures for how much gold China bought from Switzerland, Dubai, or London, but Frisby offers some estimates: 22,000 tons of gold were withdrawn from the Shanghai Gold Exchange. Another 4,000 tons were owned by the Chinese government in 2000.

In total, Frisby estimates that China holds at least 33,000 tonnes of gold, half of which may be state-owned. That's four times the amount of gold the United States holds.

In the Vietnamese market, gold prices tend to increase again. Specifically, by the end of the trading session on July 18, the price of 9999 gold bars at SJC and Doji was listed at 119.5-121 million VND/tael (buy - sell). SJC announced the price of gold rings of type 1-5 at only 114.2-116.7 million VND/tael, while at Doji it was 115.9-118.4 million VND.

Will the price of gold rise to 128 million VND/tael or only increase slightly from now until the end of the year? Whether the price of gold will skyrocket to 4,000 USD/ounce (128 million VND/tael) or only increase slightly in the second half of 2025 depends on many factors that the World Gold Council has just given.

Source: https://vietnamnet.vn/gia-vang-leo-thang-trung-quoc-co-the-manh-tay-mua-tich-tru-2423361.html