China Buys 21 Tons of Gold in September in Largest Monthly Increase Since 2023

The People's Bank of China added 21 tons of gold to its reserves in September, bringing holdings to 2,196 tons, in the largest monthly increase since September 2023. This marks the 23rd consecutive month the bank has increased its purchases, confirming that its official buying program has not stopped.

September purchases surpassed those of August, which stood at 18.5 tons, and July purchases, which reached 18 tons, indicating that the bank did not pause its buying program but rather accelerated its pace last month following a relative slowdown during the summer.

This increase came at a time when China's foreign exchange reserves fell to $3.4 trillion by the end of September, down $38.1 billion from the previous month. This represents the highest pace of gold buying since 2023, prompting the bank to reallocate a portion of its reserves toward the yellow metal.

Ongoing Chinese purchases represent structural support for gold prices, offsetting a decline in short-term investor buying at a time when central banks across emerging markets continue to bolster their stockpiles of the metal away from dollar-denominated assets, thereby reducing the impact of sell-off waves in financial markets on prices.

What do these terms mean?

Foreign Exchange Reserves: Foreign assets held by the central bank, including hard currencies, gold, and bonds, used to support the domestic currency and settle external obligations.

Official Demand: Purchasing conducted by central banks and governments, which is considered more stable than demand from retail investors.

Diversification: Allocating reserves across multiple assets to minimize risk rather than relying on a single currency.