For the first time in three years, it has continuously increased its holdings. Is it the favorite asset of the “central banks”?
Source: Wall Street Insights Zhang Jin
On January 9, many stocks in the gold sector rose, Zijin Mining rose by more than 7%, Chifeng Gold, Yintai Gold, etc. followed suit.
On the news, the People’s Bank of China reported an increase in its gold holdings for the second month in a row after not buying gold in more than three years. In addition, the global gold purchase volume has hit a new high, the industry will welcome the consumption peak season, and the Fed’s slowdown in raising interest rates is also an important catalyst behind it.
China’s central bank increases gold holdings for second straight month
According to data released on the central bank’s official website on Saturday, the People’s Bank of China increased its holdings by 970,000 ounces in December 2022. This is another increase in the People’s Bank of China after it increased its holdings by 1.03 million ounces in November.
It is worth noting that since September 2019, the central bank’s gold reserves have remained unchanged for more than three consecutive years.
According to Wind data, as of December, China’s total gold reserves were 64.64 million ounces, an increase of 1.5% from November and 3.19% from October. Significantly faster than the 2018 round.
Global central bank gold purchases hit record highs
According to statistics, since 2015, the ratio of gold reserves to the total global foreign exchange reserves has been rising all the way, reaching 17.7% in the second quarter of 2022, the highest level since 2000.
And behind this is the continuous increase of central banks’ gold reserves. According to data from the World Gold Council, in the first three quarters of 2022, the global central bank’s gold purchases reached 673 tons, the highest level since records began in 1967. The total reserves of China have also continued to rise since 2008.
It is worth noting that the global central banks had previously increased their gold purchases significantly in 2011 and 2018, andgold priceBoth rose in the corresponding years, and continued to rise in the following year.
CITIC Securities analyzed that in 2022, under the background of violent fluctuations in asset prices in the global financial market, central banks of various countries will choose to increase their holdings of gold to achieve the goals of diversifying risks, stabilizing volatility, and fighting inflation. Gold is becoming the reserve asset favored by central banks of various countries.
Goldman Sachs commodities trader Ryan Voon wrote in the latest report that there are three reasons for gold to rise this year. The third is that due to the impact of geopolitical conflicts, central banks of various countries will prefer “neutral assets” such as gold.
Gold will welcome the Spring Festival consumption peak season
On the other hand, as the Spring Festival approaches, gold will also usher in a peak consumption period. According to data from the Shanghai Municipal Commission of Commerce, the total offline passenger flow in the city’s 36 business districts has reached 20.5 million, and the passenger flow has recovered to about 90% before the epidemic. And various gold jewelry brands have also launched discount activities such as gold derogation, trade-in and other full discounts in different degrees to increase discounts to welcome the Spring Festival holiday.
Minsheng Securities also stated that the gradual recovery of offline consumption scenarios, the increase in passenger traffic in supermarkets, etc., and the rigid demand for marriage and love will jointly promote the recovery of consumer confidence before the Spring Festival, which is expected to bring a rebound in the consumption of gold jewelry with strong optional consumption attributes .
In addition, it also pointed out that since 2017, the rise and fall of the gold and jewelry index in the five trading days after the Spring Festival holiday has generally been ahead of the performance of the Shanghai and Shenzhen 300 index.
In addition, Caitong Securities believes that the need for the Fed to raise interest rates significantly has decreased, and the tone of the slowdown in interest rate hikes has superimposed concerns about rising expectations of economic recession, making gold assets with relatively more stable hedging properties stronger.
For the market outlook, CITIC Securities believes that the price of gold is expected to maintain an upward trend, and the current round of price highs is expected to break through the highs before 2020.
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