China’s central bank refrained from purchasing gold for its reserves for the sixth month straight in October, according to the latest official data. By the end of last month, China’s gold holdings stood at 72.8 million troy ounces. However, the value of the reserves rose to $199.06 billion from $191.47 billion at the end of September due to the recent surge in gold prices.
The share of gold in China’s central bank’s overall reserves reached 5.7 percent at the end of October compared to 4.9 percent at the of April.
Gold has gained over 36 percent in the last year and is on track for the largest annual gain in 45 years, driven by the U.S. Federal Reserve’s interest rate cut cycle, rising geopolitical tensions, and uncertainty surrounding the U.S. presidential election.
Gold demand rises to over $100 billion
Demand from central banks globally also played a major role in supporting the rise in gold prices. The World Gold Council’s Q3 2024 Gold Demand Trends report reveals that total gold demand increased 5 percent year-on-year to 1,313 tons, a record third quarter. Total demand exceeded $100 billion for the first time on record, supported by strong investment in a record-high price environment.
“Q3 saw increased investment and over-the-counter activity prop up global gold demand and drive price performance. While the higher gold price dampened demand in the majority of consumer markets, the import duty cut in India kept jewelry and bar and coin demand remarkably high in a record-breaking price environment,” stated Louise Street, senior markets analyst at the World Gold Council.
Global investment demand more than doubled year-on-year to 364 tons, driven by a shift in demand for gold ETFs primarily from Western investors. Globally, gold ETFs added 95 tons, marking the first positive quarter since Q1’22. Bar and coin demand fell 9 percent, but the year-to-date total remains strong at 859 tons compared to the 10-year average of 774 tons.
Central bank buying slows in Q3
However, central bank buying, for instance in China, slowed in Q3 though demand remained robust at 186 tons. Year-to-date, central bank demand reached 694 tons, in line with the same period of 2022.
“Looking ahead, the step-change in gold investment flows is a trend that is likely to continue, which could keep both demand and price levels elevated. On the other hand, we’ve seen over 30 record price highs in 2024, and that environment will continue to be challenging for consumers. However, the prospect of economic growth is another factor we will be watching that could tip the scales,” she added.
Countries with the largest gold reserves
The World Gold Council recently revealed that as of Q2 of 2024, the United States held the largest gold reserves globally at 8,133.46 tons. Second came Germany at 3,351.53 tons then Italy at 2,451.84 tons.
France and Russia followed closely at 2,436.97 tons and 2,335.85, respectively. In 6th place came China, holding 2,264.32 tons of gold reserves.
Gold is an important component of central bank reserves because of its safety, liquidity, and return characteristics, the three key investment objectives for central banks. Therefore, they are significant holders of gold, accounting for around a fifth of all the gold that has been mined throughout history.
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