PBOC Gold Buying Grows Despite Sharp Drop (Plunge), Hits 24 Months

What 24 Consecutive Months of PBOC Gold Buying Signals

International gold prices fell nearly 7% in October, yet the People's Bank of China (PBOC) increased its gold reserves again. According to a Yonhap News securities report, the PBOC purchased gold for the 24th consecutive month through the end of October. The real takeaway is not that a price rebound is assured, but that central-bank demand has persisted despite price weakness.

Central-bank gold buying refers to monetary authorities adding gold to their reserve assets. For Korean investors, the immediate factor to watch is not interest rates or individual companies' earnings, but a key source of demand in the international gold market. Continued purchases during a price decline show that gold prices and buyer behavior can move in opposite directions over the same period.

Holdings Rise by 830,000 Ounces to 78.3 Million Ounces

As of the end of October, the PBOC's gold reserves had increased by 830,000 ounces, or about 25.8t, from the previous month to 78.3 million ounces. The PBOC continued buying from November 2024 through last month, bringing cumulative purchases for January through October this year to about 129t. This is why investors should focus on the accumulated purchasing trend rather than a single month's price movement.

According to World Gold Council (WGC) data, the PBOC purchased about 63t in the third quarter of this year, the largest disclosed amount among the world's central banks. The same data showed that global central banks made net gold purchases of 321t in the third quarter. The breadth of gold demand is underscored not only by China's activity, but also by net buying across central banks as a group.

Prices sent a different signal from demand. International gold prices fell nearly 7% in October, dropping below $4,000 per ounce, or about 5.45 million won. The decline since the U.S.-Iran war began in late February has exceeded 20%. This indicates that continued buying alone cannot be assumed to have fully offset short-term downward pressure on prices.

What Gold Prices Reflect—and What They Do Not Yet Reflect

Separating what is confirmed from what remains unknown makes the assessment clearer. Confirmed figures include the PBOC's 24 consecutive months of purchases, cumulative purchases of about 129t from January through October this year, and global central banks' third-quarter net purchases of 321t. What remains unknown is the PBOC's purchase price, its official purpose, its future buying plans, and the next direction of international gold prices.

What the market has already reflected is October's price decline. What remains to be assessed is whether central-bank demand will continue at the same strength. If the PBOC maintains its purchases, recurring demand will remain in the gold market. If purchase volumes decline or the buying trend reverses, the current interpretation of demand will weaken. This is why reserve statistics should be checked before prices.

China's foreign exchange reserves should also be monitored. According to China's State Administration of Foreign Exchange, reserves stood at $3.405178 trillion at the end of October, up $4.927 billion, or 0.14%, from the previous month. The amount was equivalent to about 4,644 trillion won, with the month-on-month increase totaling about 6.7204 trillion won. Although increases in gold holdings and foreign exchange reserves were recorded simultaneously, the available data do not establish a causal relationship between the two changes.

The Next Figures Korean Investors Should Watch

• PBOC gold reserves: The key points in the next data release will be whether consecutive monthly purchases continue and how much holdings increase from the previous month. Continued buying provides the most direct indication of the strength of central-bank demand.
• Global central-bank net purchases: Investors should check subsequent World Gold Council (WGC) data to see whether the third quarter's 321t net-buying trend continues. If buying outside China weakens, the breadth of the demand base will also change.
• International gold prices: Investors should watch whether prices, which fell below $4,000 per ounce in October, continue to diverge from central-bank purchasing. If prices fail to recover despite continued buying, other selling pressures may be stronger.
• China's foreign exchange reserves: Changes from the end-October level of $3.405178 trillion in the next data release should be assessed separately from gold holdings. The fact that both figures move in the same direction is not sufficient to infer the purpose of gold purchases.

The bullish scenario is that continued purchases by the PBOC and global central banks sustain the international gold market's demand base. The trigger for the opposite scenario would be a slowdown in the growth of official holdings. The next assessment will hinge less on a one-day rebound in gold prices than on the PBOC's month-on-month reserve figures and the World Gold Council's (WGC) net-purchase data.

This article was automatically summarized and analyzed based on the original news report. View the original article (Yonhap News Securities)