China resumes gold buying following six-month break

China boosted official gold reserves for the first time in over half a year, a move experts said reflects expectations of further gold price rises and indicates the country's aim to strengthen its currency credibility against intensified uncertainties.

The country's official gold reserves came in at 72.96 million ounces at the end of November, a rise of 160,000 ounces from a month earlier, data from the State Administration of Foreign Exchange showed on Saturday. The move came after China suspended its gold holding increase for six straight months.

The increase was unexpected by many analysts as although the international gold price fell in November, it was still around record highs and significantly higher than in May, when China paused increasing gold holdings.

"With China resuming gold purchases in November, it likely reflects expectations that international gold prices could remain on an upward trajectory for a considerable time following shifts in the global political and economic landscape after the US president election," said Wang Qing, chief macroeconomic analyst at Golden Credit Rating International.

"Given China's relatively low proportion of gold in its reserves, increasing gold holdings aligns with optimizing reserve structure. Moreover, given that gold is a globally recognized ultimate payment method, increasing gold reserves can enhance the credibility of the renminbi and create favorable conditions for the currency's internationalization," Wang said.

Meanwhile, China's foreign exchange reserves increased to $3.2659 trillion as of the end of November, up 0.15 percent or $4.8 billion from the previous month, SAFE said, amid a strengthening US dollar index and rising global financial markets.

"China's economic recovery is gaining momentum and market confidence is improving, which will continue to provide support for the general stability of foreign exchange reserves," the administration said.

Guan Tao, global chief economist at BOCI China, told China Daily earlier that international gold prices still have room to rise in the cases of a US economic soft landing and hard landing, thanks to declining US yields and the demand for hedging against elevated inflation and geopolitical tensions.

It is possible for international gold prices — which stood at more than $2,600 per ounce as of early December — to reach $3,000 per ounce, Guan said, with global central banks' increased gold reserves contributing to the trend.