This Factor Could Impact the Bull Market and Drive Prices Down

In recent months, gold prices have experienced a significant rise, but there is a factor that may impede further gains in the short term: China’s recent lack of purchases. Last Friday, the country announced that it did not increase its gold reserves in the past month, raising concerns about whether this trend will continue and how it might impact the momentum of the precious metal.

An analyst from the Swiss firm Julius Baer pointed out in a report that if China persists in not reporting purchases in the coming months, it could dampen the overly positive sentiment in the gold market, prompting speculators to reconsider their positions.

Carsten Menke, head of next-generation research at Julius Baer, views this situation as a “temporary setback.” He emphasizes that there remains a strong belief in ongoing substantial purchases by central banks, driven more by political factors than economic ones.

Julius Baer also notes that China’s historical transparency regarding its gold purchases has been lacking, and given the rising geopolitical tensions with the United States, the People’s Bank of China may eventually resume increasing its gold reserves to lessen its dependence on the U.S. dollar.

Despite its extensive acquisitions, China’s gold reserves constitute less than 5% of its total monetary reserves, which is notably below the global average of over 15%. This disparity could indicate that there is still considerable room for growth in China’s gold holdings, especially when measured in tons.

As of 3 p.m. ET, gold futures for August delivery have increased by 0.18%, reaching $2,329.10.