China’s central bank continues to load up on gold

Reserves managers around the world are trying to trim exposure to the US dollar

Harry Dempsey in London

China has added more than 100 tonnes of gold to its reserves over the last ten months, underlining its position as one of the leading central bank buyers of the precious metal.

The People’s Bank of China announced over the weekend that its holdings of the yellow metal rose to 62.64m ounces in September, an increase of 190,000 ounces from August.

The increase of nearly 5.4 tonnes of gold to China’s holdings — bringing the total additions since December to more than 105 tonnes — comes at a time when central banks across the world have been trying to diversify their reserve assets away from the US dollar as trade tensions continue to simmer.

Gold is considered a haven asset and a store of value in times of uncertainty.

Last year central banks, led by Russia, bought more gold last year than at any time since America decided to move off the gold standard in 1971, with around $27bn worth of purchases.

So far this year a total of 14 central banks, primarily from emerging markets, have bolstered their gold reserves, according to data from the World Gold Council. That has helped support the gold price, which touched a six-year high last month. On Monday it was trading a fraction below $1,500 a troy ounce, up about 17 per cent for the year.

“China hasn’t said what its gold policy is but it would need to buy two years worth of global production to achieve diversification,” said Suki Cooper, precious metals analyst at Standard Chartered Bank. “It looks like it is on track to add 150 tonnes for the whole year. The desire to add gold is there.”

China’s central bank has continued to stock up on bullion as the trade war with the US shows little sign of easing and its domestic economy is slowing. Negotiators from the US and China are due to meet at the end of the week.

China’s foreign-exchange reserves have held fairly steady over the past couple of years, averaging $3.1tn. Beijing does not provide a full breakdown of its holdings, but officials have previously said that the currency mix is broadly in line with the composition of global reserves as indicated by IMF data collected from member countries. US dollar assets comprised 64 per cent of allocated reserves at the end of 2016, according to the latest data.

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