Will China’s New Gold Buying Spree Propel Prices Above $3,000?

Gold prices have started December on an absolute tear, notching up their fourth consecutive day of gains on Thursday after the People’s Bank of China (PBOC), announced it was expanding its Gold reserves again after a six-month pause.

The yellow metal skyrocketed above $2,720 an ounce on Thursday, inching back within striking distance of the all-time record high set only a month ago.

There is no denying that the current macroeconomic backdrop is fuelling a “perfect storm” for Gold – cementing expectations that prices are now firmly on track to score fresh all-time record highs.

A scenario which could become reality by the end of this month, if not sooner.

China Resumes Gold Buying, Sets Stage for Potential Increase in Bullion Reserves

In a statement released earlier this week, the People’s Bank of China said it had increased its Gold reserves by 5 tonnes in November to 2,269 tonnes – marking its first new purchase since April.

According to data tracked by GSC Commodity Intelligence – the PBOC was the world’s largest official buyer of Gold in 2023 – playing a pivotal role in launching the precious metal on a furious bull run that has seen prices rack up back-to-back all-time record highs – not once, not twice, but on 39 separate occasions, so far this year.

Even with the six-month pause, the PBOC has purchased over 34 tonnes of Gold this year to maintain its crown as the world’s single biggest Gold buyer in 2024. However, despite the increase, Gold still only represents 6% of China’s total bullion reserves.

But here’s where things really start to get interesting. A growing consensus of Wall Street’s most powerful institutions believe China is planning to increase its Gold holdings by an estimated 15%, if not 20%, of its total bullion reserves by 2028.

The importance of this cannot be underestimated and will continue to support Gold’s long-term bullish uptrend.

Historically, when China leads the charge other central banks tend to follow suit. In fact, traders are already starting to price in that the PBOC will ultimately inspire other central banks around the world to ramp up their Gold purchases.

In a note to clients, analysts at GSC Commodity Intelligence wrote “China’s renewed Gold buying is sending a strong message to its global central banking peers that now is the time to start accumulating again”.

Gold Set to Soar Amid Global Uncertainty and Trump’s Return

China’s Gold revival aligns with the precious metals status as a safe-haven amid persistent geopolitical tensions, ballooning global debt and the Federal Reserve’s continued interest rate cuts – following reductions in September and November, with another expected later this month.

And perhaps the most bullish catalyst of all – Donald Trump’s return to the White House in January 2025 with his “highly inflationary” policies including higher tariffs, increased government spending, massive tax cuts and aggressive global trade wars.

Whichever way you look at it, one thing is clear. The macroeconomic backdrop for Gold heading into 2025 is looking more bullish than ever before – and it certainly won’t take much for prices to break new record highs in the coming weeks and months ahead.