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Below the Perspective on China Halts Gold Buying Spree, Signalling Market Shift by Ms.Riya Singh – Research Analyst, Commodities and Currency , Emkay Global Financial Services Ltd

China Halts Gold Buying Spree, Signalling Market Shift

 * China’s central bank paused its gold acquisitions in May, concluding an 18-month buying spree that had driven the precious metal to a record high in May. The People's Bank of China (PBOC) maintained its gold reserves at 72.80 million troy ounces, a marked departure from its consistent purchases since November 2022. This move, influenced by soaring prices, suggests a significant market shift.

 * The halt in gold buying reflects the PBOC's hesitation to continue purchasing at elevated prices. Earlier signs of waning demand were evident, with April's acquisitions dropping to 60,000 troy ounces from 160,000 in March and 390,000 in February. Additionally, China's gold imports fell by 30% in April compared to the previous month, indicating a broader trend of cooling interest in the metal.

 * This development coincides with a decline in silver prices, attributed to market caution ahead of the US Non-Farm Payroll (NFP) data release. The precious metals market has been volatile, with bullion prices rising in response to the European Central Bank’s (ECB) recent rate cut. The ECB's decision has fueled speculation that the US Federal Reserve might follow suit with a rate cut in July, further impacting market dynamics.

 * The PBOC's buying spree had been part of a broader strategy among global central banks to bolster reserves amid escalating geopolitical tensions. However, the current pause underscores the challenges of sustaining such purchases in the face of record-high prices. The PBOC's decision may signal a period of adjustment for the gold market, potentially leading to price stabilization.

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