China: Foreign Exchange and Gold Reserves on the Rise

In September 2024, China’s foreign exchange reserves increased 0.86% from August’s total, rising from $3.288 billion to a record high of over $3.316 billion. As the China State Administration of Foreign Exchange clarified, the increase in foreign exchange reserves was made possible by the “joint” effect of currency conversion and “changes in asset prices.”

Also in September, China’s gold reserves “increased significantly in monetary terms due to the recent rise in gold prices.” China’s gold reserves stood at 72.8 million ounces (2,264.33 tons) at the end of last month – steady for the fifth consecutive month – while the dollar-denominated value of gold reserves rose from $182.98 billion at the end of August to $191.47 billion at the end of last month.

Interest rate cuts by the US Federal Reserve (Fed), geopolitical tensions, and strong demand for gold from central banks in many countries around the world have led gold prices to rebound about 28 percent this year. As of 2023, the Central Bank of China (CBC) was the largest official buyer of gold in the world. China’s purchases continued for 18 consecutive months until May 2024, after which the CBC suspended the rush for the yellow metal due to high prices.

“As gold prices rise, the CBC continues to postpone new purchases. We believe China’s central bank wants to buy more gold but is waiting for a more attractive entry point,” Nitesh Shah (pictured), chief commodities strategist at London-based Wisdom Tree financial consultancy told London’s Reuters news agency.

“However,” Nitesh Shah further noted, “given the fall in global interest rates and rising geopolitical tensions, it looks like we may have to wait a while for prices to come down. Given our forecast for prices to rise to more than $3000 per ounce next year, China’s central bank may consider resuming purchases before the end of 2024.”