PBOC boosts gold reserves by most since 2023 as yuan fixing weakens

The People's Bank of China boosted gold holdings by 480,000 ounces in June, the largest monthly increase since October 2023, even as spot gold tumbled 11.65 percent in its worst month since the global financial crisis.

"The 480,000-ounce increase, equivalent to about 15 metric tons, lifted total reserves to 75.44 million fine troy ounces," the PBOC said in its monthly data release on Tuesday.

The value of China's gold reserves fell to $303.72 billion at end-June from $340.75 billion in May, reflecting bullion's 11.65 percent slide. Spot gold briefly broke below $4,000 an ounce during the selloff as the dollar strengthened and traders priced in a higher probability that the Federal Reserve would keep interest rates elevated. The Iran conflict also kept alive concerns that inflation could remain sticky despite peace talks.

The purchases extend the PBOC's buying streak to 20 consecutive months, as Beijing pushes to reduce reliance on dollar assets. The central bank also set the USD/CNY reference rate at 6.8077 on Tuesday, slightly weaker than the prior day's 6.8054, suggesting policymakers are prioritizing export competitiveness even as they accumulate gold as a geopolitical buffer.

Gold's Rout Tests Beijing's Buying Strategy

The 11.65 percent monthly decline in spot gold — the steepest since October 2008 — wiped $37 billion from the book value of China's gold reserves. The last time the PBOC added more gold in a single month was October 2023, when holdings rose by 740,000 ounces. At that time, gold was trading near $1,900 an ounce, compared with roughly $4,000 in June before the selloff.

The buying streak comes as central banks globally have been net purchasers of gold for consecutive years, driven by sanctions on Russia's dollar reserves and rising geopolitical tensions. China now holds more than $300 billion in gold, making it one of the largest sovereign holders alongside the U.S. and Germany.

Yuan Fixing Points to Cautious Easing Bias

The PBOC's decision to set the daily USD/CNY fixing at 6.8077, marginally weaker than the previous session's 6.8054, marks a subtle shift in the central bank's currency management. The fixing, which sets the trading band for the onshore yuan, has been used as a policy tool in recent months as China's economic recovery has shown signs of unevenness.

A weaker fixing reduces the cost of Chinese exports at a time when trade tensions with the U.S. and Europe remain elevated. It also gives the PBOC more room to ease monetary policy without putting excessive pressure on the currency. The offshore yuan traded near 6.82 per dollar following the fixing.

This article is for informational purposes only and does not constitute investment advice.