The move shows that China has not given up on its strategy to diversify reserves amid rising tensions with the US
Trump’s victory in the presidential election may have played an important role in Chinese decision-making. The active US sanctions policy has served as the main catalyst for gold markets, as central banks have begun to diversify their reserves to reduce their dependence on US government debt.
Since Trump is hawkish on China, his victory may have prompted a new round of gold buying at the PBOC, which could last for many months. Most likely, China wants to increase the share of gold in its reserves as it prepares for a possible trade war with the US
Interestingly, gold prices failed to return to historical highs after the PBOC resumed its purchases. It appears some traders are willing to take profits off the table ahead of the Fed’s decision. Additionally, Treasury yields have been rising in recent days, which has been bearish for gold.
Over the long term, central bank purchases will continue to serve as the main bullish catalyst for gold markets. The PBOC has returned to the market, which will provide additional support to the gold price. Although gold does not have enough time to reach the psychologically important $3000 level before the end of the year, it has a good chance of testing this level in 2025.
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