China's Gold Reserves Surge as Central Bank Purchases Accelerate

China's central bank added around 20 tonnes of gold to its reserves in July, marking its largest monthly purchase since October 2023. This lifted China's official gold holdings to 2,366 tonnes, equivalent to about 8% of the country's total foreign exchange reserves.

The People's Bank of China has been steadily increasing its gold purchases over the past two years, with July being its 21st consecutive month of buying. The World Gold Council attributes this trend to the bank's desire to diversify its reserves and hedge against economic risks.

Investors in China also returned to gold exchange-traded funds (ETFs) in July, with around $744 million flowing into Chinese gold ETFs during the month. This marks a strong rebound in investment demand after several months of outflows.

However, physical wholesale demand for gold remained weak in July, falling 8% month-on-month to 80 tonnes. The World Gold Council notes that this decline is largely seasonal, but also reflects the continued pressure on traditional consumer demand due to high prices and weak consumer confidence.