So, how much gold does the People's Bank of China currently hold? Why has it paused increasing its gold reserves? And what will the future holding situation be like?

01 The People's Bank of China has suspended the increase of gold for five consecutive months!

News on October 7th, according to the latest data released by the People's Bank of China, as of September, the People's Bank of China's gold reserves are 72.8 million ounces, which is consistent with April, May, June, July, and August.

In other words, since May 2024, the People's Bank of China has suspended the increase of gold for five consecutive months, with the scale of gold reserves remaining at 72.8 million ounces, equivalent to 22,643.3 tons, while the central bank had previously increased gold for 18 consecutive months.

This move to suspend the increase has attracted widespread attention in the market. Looking at the market environment, the current gold price is at a historical high. According to relevant data, the international gold price has been continuously setting historical records in recent times, hovering in a high range.

02 Why has the People's Bank of China suspended the increase of gold reserves?

2.1 High gold price

International gold prices have continued to rise in recent years and have been fluctuating at high levels.Taking 2024 as an example, on July 5th, the New York gold futures price closed at $2399.80 per ounce, marking a significant increase and reaching a peak within a month.

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Currently, the price of gold remains at a historical high, and last week also set a new historical record.

Against the backdrop of such high gold prices, the risk of premium on gold purchases also rises. Central banks, considering cost control, timely adjust their gold purchase strategies to avoid increasing reserve costs when gold prices are high.

In addition, Wang Ye said Finance also noticed that the latest data shows that after the People's Bank of China (PBOC) increased its gold holdings for 18 consecutive months, it suspended the increase in May 2024. This decision helps the central bank to better control costs, optimize the structure of foreign exchange reserves, reduce risks, and reserve space for possible future market changes.

2.2 Policy Adjustment Considerations

Second, the PBOC's suspension of gold purchases may be to "cool down" the domestic gold investment market to avoid blind follow-up investment by ordinary investors.

Furthermore, this also reflects the central bank's cautious attitude towards the current economic situation and multiple considerations for the future economic direction.

Under the current economic situation, the central bank needs to consider various factors comprehensively to ensure the safety and stability of foreign exchange reserves.

From a macroeconomic perspective, the central bank's decision is based on an in-depth analysis and judgment of the domestic and international economic situation. At present, the global economic outlook is unclear, and market expectations are changeable. The central bank needs to respond cautiously to potential market risks.

At the same time, the central bank also needs to consider the development needs of the domestic economy, reasonably adjust the structure of foreign exchange reserves, and achieve the optimal allocation of assets.By pausing the increase in gold holdings, central banks can guide the market towards rational investment, prevent excessive speculative behavior, and maintain the stability of the financial market.

In this regard, Pang Ying, Chief Economist for Greater China at JLL, stated that against this backdrop, the central bank's pause in increasing gold holdings reflects the central bank's efforts to balance the goals of adjusting and optimizing the structure of international reserve portfolios, ensuring the preservation and appreciation of reserve assets and their returns, and reducing the risk and volatility of the asset portfolio.

03 How will China's gold reserves be in the future?

Although the People's Bank of China is currently pausing the increase in gold holdings, in the long term, the global central banks' net gold purchasing trend may continue.

Data disclosed by the World Gold Council shows that in 2024, the latest data reported by central banks worldwide through the International Monetary Fund and other public sources indicate that the global central banks' net gold purchases in June were 12 tons. Although the total purchases and sales volume has decreased compared to the same period last year, the trend of gold purchases is still ongoing, with emerging market banks being the main force in both buying and selling gold.

The uncertainty brought by future economic and geopolitical factors will become an important factor affecting the gold market.

Under the current changes in the international political and economic landscape, the global central banks' gold purchasing behavior will continue, especially for central banks in developing economies.

At present, the global economic outlook is unclear, market expectations are variable, and geopolitical conflicts are ongoing, such as tensions in the Middle East, all of which increase the uncertainty of economics and geopolitics. Safe-haven factors will inevitably lead to a large influx of funds into the gold market, providing support for gold prices.

The Federal Reserve's interest rate cuts, which drive down real interest rates, will also help drive up gold prices.From the perspective of gold pricing logic, gold, as a precious metal commodity, has its price determined by both supply and demand. However, due to the limited annual production and dispersed production locations of gold, the supply of gold does not fluctuate much compared to demand. Therefore, gold prices are primarily driven by demand. The Federal Reserve's interest rate cuts will lead to a decline in real interest rates, reducing the opportunity cost of holding non-income-generating assets, thereby increasing the demand for gold.

Although the People's Bank of China (PBOC) has currently paused its gold purchases, future central bank decisions will still be influenced by a variety of factors. On one hand, central banks need to consider a comprehensive range of factors such as domestic and international economic situations, market expectations, and geopolitical situations to ensure the safety and stability of foreign exchange reserves. On the other hand, central banks also need to pay attention to the trends in the gold market and adjust the structure of foreign exchange reserves reasonably to achieve the optimal allocation of assets.

Therefore, even though the PBOC has currently halted its gold purchases, in the long term, the global central banks' net gold buying trend may continue. The uncertainties brought about by future economic and geopolitical factors, as well as the Federal Reserve's interest rate cuts leading to a decline in real interest rates, may still influence central bank decisions.