China resumes buying gold after 6-month hiatus, abandoning Bitcoin reserve ideas

China’s uncertainty about the crypto industry has once again come to the fore. As of today, the People’s Bank of China (PBOC) disclosed official data that in November, the central bank reinitiated gold purchases for its reserves, a move it had paused for six months after the precious metal reached record-high prices.

According to Fed Chief Jamie Powell and other analysts, Bitcoin is not a competitor to the dollar; rather, it is a competitor to gold. Bitcoin exhibits numerous similarities to gold, including its enduring nature, scarcity, and mining difficulty. 

In recent months, BRICS nations have intensified efforts to introduce their own currency as part of a broader de-dollarization initiative. The decentralized finance, which is inclined toward Bitcoin, has been taken into account. 

China, however, has not been sure about legalizing crypto entities. The nation has opted to take small steps, like virtual tokens regulated by the stablecoin bill in Hong Kong, most recently. China has opted for gold as its reserve asset; in fact, in 2023, the PBOC was the world’s largest official sector consumer of gold. 

China re-introduces gold purchases

According to reports, at the end of November, China’s possession of gold increased by 160,000 fine troy ounces to 72.96 million fine troy ounces. This marked an increase from 72.80 million troy ounces months before. 

In April of this year, the PBOC increased its stockpiles, which contributed to the resilience of bullion prices. However, in November, the value of China’s gold reserves decreased from $199.06 billion in October to $193.43 billion.

November was gold’s first monthly price drop since June, which was precipitated by a post-US election sell-off that was led by Donald Trump’s victory.

Also, spot prices for the precious metal have declined by 5% since reaching a record high of $2,790.15 per ounce on October 31, but they have still increased by 28% thus far this year.

In October, gold reached an all-time high due to more people looking for safe havens because of the recent US presidential election and the tension in the Middle East and Ukraine.

In addition, China’s consumers have decreased their demand for bullion as prices have increased by nearly 30% thus far this year. Although gold bars and coins have maintained their value for the first three quarters, retail sales of discretionary items such as jewelry have dropped as investors attempt to protect their wealth from a weakening economy.

Ole Hansen, head of commodity strategy at Saxo Bank, said, “The resumption will send a signal that the PBOC has grown accustomed to these record-high price levels and is prepared to build reserves regardless.”

The PBOC’s resumption of purchases may also boost Chinese investor demand, which has been low since the bank suspended its 18-month purchasing campaign in May.

The current state of the gold market  

Gold (XAU/USD) is currently trading at $2,640.30, representing a 0.32% increase. However, it continues to be below the critical pivot at $2,644.90. On Friday, gold tried to break through a bearish flag pattern again but failed.

$2,634.00 and $2,623.66 provide support, while key resistance targets are $2,657.02 and $2,666.24.

The 50-day EMA at $2,642.35 provides near-term stability, while the 200-day EMA at $2,646.99 emphasizes resistance.

The bullish momentum may be confirmed by a break above $2,644.90, while a sustained decline below this level could move sentiment to bearish, with a focus on lower support levels.