China Emerged as the Leading Central Bank Gold Buyer in 2023
China has solidified its position as the world’s top central bank gold buyer in 2023, according to new data from the World Gold Council (WGC). The People’s Bank of China (PBOC) added 225 tons of gold to its reserves throughout the year, marking the largest single-year haul of gold since 1977. By the end of 2023, the PBOC’s gold reserves stood at 2,235 tons, representing about 4 percent of the country’s massive $3.22 trillion international reserves.
The National Bank of Poland emerged as the second-largest central bank buyer, increasing its total gold holdings by 57 percent to 359 tons. The Monetary Authority of Singapore added 77 tons to its reserves, reaching 230 tons. The Central Bank of Libya and the Czech National Bank also made significant purchases, acquiring 30 tons and 19 tons respectively. In contrast, the National Bank of Kazakhstan, the Central Bank of Uzbekistan, and the Central Bank of Bolivia were the top net sellers, collectively reducing their gold reserves by 90 tons.
While central bank demand for gold remained strong in 2023, it did ease slightly from the record high achieved in 2022. Last year, central banks purchased a total of 1,037 tons, down 4 percent from the previous year.
The average price of gold in 2023 was $1,940.54 per ounce, representing an 8 percent increase from the previous year. As of February 9th, the price of gold on the COMEX division of the New York Mercantile Exchange is around $2,040 per ounce.
China’s Gold Buying Continues to Start 2024
China has continued its gold-buying streak into January 2024, acquiring an additional 10 tons of gold and extending its streak to 15 consecutive months. Market analysts expect China and other central banks to continue purchasing gold throughout the year due to economic uncertainty and geopolitical tensions.
According to Louise Street, the senior markets analyst at the WGC, central bank demand for gold has been a driving force in supporting overall gold demand. Central banks often cite gold’s performance in times of crisis as a reason to buy, which suggests that demand from this sector will remain high in 2024. This demand may help offset a potential slowdown in consumer demand due to elevated gold prices and slowing economic growth.
Economists believe that China’s gold-buying spree is a strategic move to protect itself from a vulnerable financial system and gradually reduce exposure to the U.S. dollar. The country has faced challenges ranging from a plummeting stock market to a debt crisis. In response, the People’s Bank of China has announced policy easing measures to bolster economic growth, including trimming the reserve requirement ratio for banks and injecting liquidity into the financial system.
Looking ahead, economists anticipate that Chinese policymakers will continue to implement policy support measures throughout the year to stabilize the economy. However, concerns remain about the country’s sluggish recovery, declining factory activity, and mounting debt challenges.
Despite these challenges, there is a growing realization among economists that China’s economy may not surpass that of the United States to become the world’s largest. The International Monetary Fund’s latest projections show that the U.S. economy is expected to grow at a slower pace compared to China’s. This suggests that the likelihood of China’s GDP overtaking that of the U.S. is declining.
In conclusion, China’s central bank emerged as the leading buyer of gold in 2023, with the People’s Bank of China adding a significant amount of gold to its reserves. The country’s continued gold purchases in 2024 reflect its strategic efforts to protect against economic vulnerabilities and reduce reliance on the U.S. dollar. While challenges persist, policymakers are expected to implement further support measures to stabilize the economy. However, the notion of China’s economy surpassing that of the U.S. is losing credibility among economists.
