China continues to buy gold and US currency
Official data, released on Saturday, revealed that China’s foreign exchange reserves rose in December with the decline of the dollar against other major currencies.
China’s foreign exchange reserves which is the largest in the world, rose by $11 billion to reach $3.128 trillion last month, compared to the $3.154 trillion expected by Reuters poll of analysts and $3.117 trillion in November.
The National Foreign Exchange Commission of China (the data issuer) attributed the increase in foreign exchange reserves to the combined effect of currency conversion and changes in asset prices.
The authority said that China’s foreign exchange reserves are expected to remain stable in general, because China’s economy has strong resilience, huge potential and great vitality, and the fundamentals supporting its long-term growth have remained strong.
The Chinese currency, the Yuan rose 2.8% against the US dollar last December, at a time when the dollar fell 2.3% last month against other major currencies.
After declining 7.9% against the dollar in 2022, the Chinese Yuan reached its highest level in more than 4 months against the US dollar on the first trading day during the New Year on January 3, supported by investor optimism that the domestic economic recovery will start at an earlier time than expected.
As for gold purchases, China announced an increase in its reserves for the second month in a row, so that the metal topped the list of holdings after making the first purchase in more than 3 years.
The People’s Bank added 30 tons of reserves in December, according to the bank’s data, which was announced on Saturday, on its website, after adding 32 tons last November, bringing the total state reserves to 2010 tons of gold.
The central bank’s purchases of gold reached a record level in the third quarter of last year, by about 400 tons, of which only a quarter went to specific institutions, according to the demand trends report issued by the World Gold Council.
China’s purchases of gold remove some ambiguity about the identity of the buyers, amid observers’ expectations that Russia may be among them, noting that well-informed parties were surprised by a significant increase in gold purchases in 2022.
China used to announce gold reserves irregularly.
Since September 2019, it didn’t announce any purchases except last November, adding 32 tons, while the last increase before that was in October 2016.