Why did more than 300 tons of the world's gold suddenly flow into the "pockets" of Chinese people?

China steps up hoarding of gold bars and coins

According to data recently released by the China Gold Association, consumers in China bought 308.9 tons of gold (10.9 million ounces) in the first quarter of 2024, up 5.9% from the same period in 2023.

China’s purchases of gold bars and coins rose 26.8% year-on-year to 106.3 tonnes in the first quarter, a clear sign of strong investment demand and interest in using gold as a hedge against risk.

China is limiting its purchases of gold jewelry and shifting to investing and storing gold in the form of bars and coins. When gold jewelry sales fell to 183.9 tons, down 3% compared to the same period last year, reflecting a change in consumer tastes.

China also boosted gold mining and production, with gold output reaching nearly 139.2 tons in the first three months of the year, up 21.2% year-on-year. However, 53.2 tons were produced using imported ore and raw materials, showing a significant dependence on foreign suppliers.

Chen Zhiwu, a professor of finance at the University of Hong Kong (China), made an important comment on the gold consumption and investment situation of Chinese households, as well as the gold reserves of the People's Bank of China (PBOC). He predicted that Chinese households will buy more gold in the future, while the PBOC will continue to accumulate gold to prepare for future geopolitical uncertainties.

While demand for gold bars and gold coins in China has increased, the purchasing power of gold jewelry has decreased. (Photo: GettyImages)

China's central bank bought 160,000 ounces of gold bullion in March, marking the 17th consecutive monthly purchase and bringing total reserves to 2,262 tonnes (72.74 million ounces), diversifying the country's reserves.

The People's Bank of China's continuous gold purchases have attracted attention and assessments from analysts and investors globally.

By diversifying its gold reserves, China will reduce its dependence on other assets and increase long-term stability. This will also create confidence from investors, strengthening the position of the Chinese yuan in the international market.

China becomes the world's leading gold consumer and producer

According to data from the World Gold Council (WGC), by the end of 2023, China was the largest buyer of gold. The country's central bank alone bought 225 tons of gold.

Meanwhile, China is set to overtake India as the world's top gold consumer by 2023, with Beijing's jewelry demand rising 10% and investment rising 28%. In its Gold Demand Trends for 2023 and Q4 2023, the WGC sees China as the main growth driver.

China has not only become one of the world's largest gold buyers, but has also become the world's largest gold producer. The country of one billion people mines at least 300 tons of gold each year, and has maintained this level of production for more than a decade.

The amount of gold that Chinese people will obtain through mining activities in 2023 is up to 370 tons, much higher than Australia's 310 tons, Russia's 310 tons, Canada's 200 tons and the US's 170 tons.

It can be seen that, in many different ways, gold is tending to “flow” to China. The significant growth in China’s gold production has demonstrated the economic and industrial strength of this country.

At the same time, as an important gold producer, China supplies a large amount of gold to the world market. Therefore, any changes in China's gold production can have a big impact on gold prices in the global market.

China’s efforts to ensure financial stability and security by diversifying its sources of supply and increasing its gold reserves are part of a broader strategy to reshape its role and influence in the international financial and economic system.

The Chinese people's "rush" into gold is also consistent with a recent report by the World Gold Council (WGC) showing that in January 2023, gold reserves at the People's Bank of China increased by 10 tons. This is the 15th consecutive month of gold additions for the world's second largest economy. China's current total gold holdings stand at 2,245 tons, nearly 300 tons higher than at the end of October 2022 when the bank reported continuing gold hoarding activities.

Regarding this issue, recently, in a recently published publication, the World Bank (WB) explained that central banks reduced USD in foreign exchange reserves and replaced it with gold. Specifically, in January 2024, central banks increased global official gold reserves by 39 tons. This figure is more than double the net purchase amount in December 2023 of 17 tons and this is also the 8th consecutive month of net purchase by central banks around the world.

Source: https://congthuong.vn/vi-sao-hon-300-tan-vang-cua-the-gioi-dot-nhien-chay-vao-tui-nguoi-trung-quoc-319067.html