China's Central Bank Makes a Bold Gold Move After Six Months
The People's Bank of China (PBOC) has resumed increasing its gold reserves in November after a six-month hiatus. According to data released by the bank on Saturday, gold holdings rose from 72.80 million ounces at the end of the previous month to 72.96 million ounces in November. This action potentially provides new support for Chinese investor demand following a pause in an 18-month buying spree that began in May.
Throughout 2023, PBOC maintained its position as the world's largest official sector gold buyer. The resumption of gold purchases is viewed as a sign of China’s commitment to increasing its reserves. However, the decline in the value of gold reserves from $199.06 billion in October to $193.43 billion by the end of November indicates that different dynamics are affecting the markets. Gold's depreciation in November has drawn attention, as it was the first month since June that gold prices showed a monthly decline following the U.S. elections. The selling pressure in the markets after Donald Trump's electoral victory negatively impacted gold prices. Ole Hansen, Head of Commodity Strategy at Saxo Bank, noted that the resumption of gold purchases by the PBOC signals an intention to normalize these high price levels and continue building reserves regardless of circumstances.
These developments reflect the PBOC's strategic reserve management approach and its commitment to gold purchases despite market conditions. It is believed that this decision by the Chinese central bank could have significant repercussions in global gold markets and may influence the gold strategies of other central banks.
How did gold start the week?
After volatile movements last month, gold stabilized as it approached December. Since November 26, gold has fluctuated within a narrow band of $2,625 to $2,650, beginning the new week with a slight rise from $2,630 to $2,643. However, it seems that gold continues to move within this narrow range.
November inflation data was released in China.
According to inflation data published by the National Bureau of Statistics of China, the Consumer Price Index (CPI) excluding food remained unchanged year-on-year in November. Previously, this figure was recorded at 0.8%. The food CPI, however, increased by 1% compared to the previous year, reversing the prior period's decline of 2.1%.
In November, the Producer Price Index (PPI) rose by 0.1% on a monthly basis, recovering from the previous period's decline of 0.2%. However, on an annual basis, the PPI recorded a decrease of 2.5%, showing a better-than-expected improvement; expectations were set at a 2.8% decrease, while the previous rate was reported at 2.9%.
The monthly and annual changes in the CPI did not meet expectations.
In China, the CPI for November decreased by 0.6% on a monthly basis, not meeting market expectations for a drop of 0.4%. In the previous month, the CPI had decreased by 0.3%. On an annual basis, the CPI increased by 0.2%, falling short of the market expectation of 0.5% and lagging behind the previous month’s increase of 0.3%.
These data illustrate that the Chinese economy presents a complex picture in light of recent price pressures and efforts to stimulate economic activity. The rise in food prices has significantly affected overall inflation figures, while the stagnation in the food-excluding CPI has drawn attention.