China's Strategic Pause: China’s Gold Buying Spree Far From Over

Central bank demand has been a critical pillar of support this year as prices pushed to record highs above $2,450 an ounce. Although central banks continue to buy gold, the pace slowed in May.

According to the latest numbers from the World Gold Council, central banks bought a net 10 tonnes of gold in May, a drop of 56% from April. The WGC noted that net buying is well below the 12-month average of 42 tonnes.

The drop in purchases does not come as a significant surprise to some analysts, as the market is missing one key player. In early June, China spooked the gold market after data from the country’s central bank showed that it didn’t buy any gold in May, ending an 18-month shopping spree.

Although China didn’t buy gold in May, analysts have said that they don’t expect it to have ended its purchase program. Analysts note that even after 18 months of buying, China’s gold reserves only equate to 4.9% of its total foreign reserves.

In a recent interview with Kitco News, Christopher Vecchio, Head of Futures & Forex at Tastylive.com, said that according to some regional data, China appears to have bought gold in the last few weeks of June.

While China has been a dominant player in the gold market, it is not alone. In a recent interview with Kitco News, Juan Carlos Artigas, head of Research at the WGC, said that central bank demand is bigger than just one country. He pointed out that a growing number of central banks are increasing their reserves.

In May, Poland’s central bank, Narodowy Bank Polski, bought 10 tonnes of gold; Turkey’s central bank bought six tonnes of gold; the Reserve Bank of India bought four tonnes of gold; and the Czech National Bank bought three tonnes of gold.

The biggest seller in May was the National Bank of Kazakhstan, which sold 11 tonnes of gold.

Artigas noted that while it’s still early, the WGC expects that central bank demand will end the year above the 10-year trend of 500 tonnes.

“Central banks are well-positioned to have a consistent or a robust year, even if we don't get to the same levels as we saw last year,” he said.

This article originally appeared on Kitco News.