Chinese Central Bank Suddenly Admitting Its Gold Purchases Again

After a six-month pause, China's central bank started formally admitting its gold purchases again last month.

According to data released by the People's Bank of China, it added about five tons of gold to its reserves in November. 

China was the biggest central bank gold buyer in 2023, but it stopped announcing increases to its reserves back in May, even as Money Metals investigative reporter Jan Nieuwenhuijs proved that China has continued to stockpile gold all along.

Even with the pause in public reporting in recent months, China still admitted adding nearly 30 tons of gold to its official reserves through the first half of 2024.

The pause in China's disclosures of gold purchases may have helped slow the ascent of the gold price during the year. Even though gold has seen big gains this year, the yellow metal has flirted with an absolute runaway situation to the upside.

The yellow metal was down about 5 percent last month after hitting a record high just below $2,800 in October.  The recent drop in the gold price appearst to have reinvigorated Chinese gold buying -- or at least a willingness to admit its purchases.

Despite the correction after Trump's electoral victory, gold is still up around 28 percent on the year. 

Meanwhile, the establishment media continues to take China's claims it had paused its stockpiling of gold as gospel.

One analyst told Reuters that the sudden resumption of buying could indicate the Chinese central bank has accepted the higher price levels. 

"The resumption will send a signal that the PBOC has grown accustomed to these record-high price levels and is prepared to build reserves regardless."

Reuters also reported that the central bank's return to the table may support Chinese investor demand. It has been muted since the People's Bank of China paused increasing its officially stated reserves. 

When the Chinese claimed it has paused new gold purchases in May, it precipitated a panicked gold selloff. Despite the kneejerk reaction, I said at the time that it was unlikely that the Chinese were finished adding gold to their reserves. 

China has a history of adding to publicly stated reserves and then going silent.

The People’s Bank of China accumulated 1,448 tons of gold between 2002 and 2019 and then reported nothing for more than two years before resuming reporting in the fall of 2022. Many speculate that the Chinese continued to add gold to its holdings off the books during those silent years.

China Likely Has Far More Gold Than Reported

As alluded to above, Jan Nieuwenhuijs reported that the People's Bank of China secretly bought large amounts of gold, even as official buying was on pause. The renowned Money Metals researcher has shown that the Chinese central bank covertly purchases gold in the London Bullion market through bullion banks.

"Since the war in Ukraine began, there has been more supply in the Chinese market than sold through the SGE; the 'surplus' reflects what the PBoC buys," Nieuwenhuijs wrote.

According to Nieuwenhuijs's analysis, China recently bought about 60 tonnes of gold. 

Even if China has been out of the picture for part of the year, central bank gold buying has been robust in 2024. October was the biggest month of the year, boosting official central bank purchases to 754 tons for the year after a record third quarter. 

The suggestion that China holds far more gold than it officially reveals is not a new one. In 2015, Jim Rickards pointed out that many people believe that China keeps several thousand tons of gold “off the books” in a separate entity called the State Administration for Foreign Exchange (SAFE).

The World Gold Council often notes "unreported" gold buying in the central bank sector. Most analysts think this represents Chinese buying off the books.