Gold Lower As 18-Month Run Of Official Chinese Buying Comes To An End

Gold pulls lower as monthly reserve data reveals a flatlining in China's gold holdings in May, bringing an end to an 18-month run of buying from the Chinese authorities

• Chinese gold purchases were seen as a major driver of the gold rally over that period, with official Chinese holdings increasing from ~62.6mn/oz in October ’22 to ~72.8mn/oz.
• Plenty of other EM nations also increased their exposure to gold over that horizon, with the global inflationary shock and a want to be less exposed to U.S sanctions touted as the key drivers of that demand.
• Elsewhere, many pointed to a de-dollarization angle, as various countries looked to become less reliant on the USD via bilateral and multi-lateral trade agreements. The USD is incrementally firmer in the wake of the Chinese data.
• Some had also pointed to the increase in Chinese metal holdings as potential signal of an imminent CNY devaluation.
• It will be interesting to see how broader EM official gold holdings evolve in the coming months, with one of the big buyers of bullion potentially having to be replaced from a flow perspective (if Chinese purchases do not resume).
• Note that Russia has the 5^th largest official reserve holdings of gold globally, while China has the 6^th last holdings (per World Gold Council Data as of end Q124).
• Technicals for gold remain unchanged although spot has looked below yesterday’s lows, last a little above $2,350/oz.
• A short-term technical bear cycle has been identified, with next support at the 50-day EMA ($2,314.5/oz).

Source: World Gold Council