China unexpectedly buys, gold price jumps

According to data from the People's Bank of China, the agency bought an additional 5 tons of gold in November, bringing its total official gold reserves to 2,269 tons, according to Krishan Gopaul, senior analyst for EMEA at the World Gold Council.

China's comeback comes amid sharp corrections and major volatility in gold prices following Donald Trump's victory in the US presidential election.

Despite the six-month pause, the PBoC has purchased a total of 34 tonnes of gold this year, maintaining its position as one of the largest gold buyers in 2024. However, gold still accounts for less than 6% of China's total foreign exchange reserves.

Many experts believe that China’s comeback is just a matter of time. In a recent interview with Kitco News, Nitesh Shah, head of commodity and macroeconomic research at WisdomTree, said that China needs to increase its gold holdings to at least 10%, if not 20%, of its total foreign exchange reserves.

“It’s not a question of ‘if’ but ‘when.’ They can’t really wait for lower prices forever because it could be an eternity. China has a relatively low gold holding compared to other foreign exchange assets and they need to increase their holdings to reduce their dependence on other economies,” he said.

Rhona O’Connell, head of market analysis for EMEA & Asia at StoneX, said recent Chinese transactions could have a psychological impact on the market.

“I take China’s 6-month gold buying “pause” lightly, as the PBoC has a history of not announcing purchases for long periods of time, then reporting a spike.

It is possible that this time they have limited their purchases at high prices in the international market, which has affected the share of gold in total foreign exchange reserves, especially when the increase reported in November was quite modest," she said.

She also stressed that the actual trading volume in the gold market far exceeds global mining output, so the PBoC's purchase figure is not too significant.

Also in an interview with Kitco News, Jesse Colombo, an independent precious metals analyst and founder of the BubbleBubble Report, said that steady demand from China will continue to support gold's long-term uptrend. He recommended buying gold on dips.

Colombo also noted that while China has stopped publicly announcing its gold purchases over the past six months, there is no evidence that they have actually stopped buying.

In a note last Saturday, he predicted the PBoC announcement could spark fresh demand from Chinese consumers, pushing gold prices to $3,000 an ounce.