PBOC extends gold-buying streak to 21 months as forex reserves rise

China's central bank extended its gold-buying streak to 21 months in July, while the country's foreign exchange reserves edged up, underscoring the continued stability of China's reserve assets amid global financial volatility, official data showed on Friday.

According to data from the People's Bank of China, the country's official gold reserves rose to 76.08 million ounces by the end of July, up from 75.44 million ounces at the end of June. The latest increase means the PBOC added 640,000 ounces of gold last month, marking the 21st consecutive month of expansion in its bullion holdings.

The PBOC's continued gold purchases came as central banks worldwide have shown renewed interest in increasing gold holdings, seen as one of the key factors behind the recent gold price rally.

Ray Jia, head of research for Asia-Pacific excluding India at the World Gold Council, said central bank gold purchases saw a strong rebound in the second quarter, rising to 289 metric tons, up more than 60 percent year-on-year and beyond the historical average.

"While some central banks may tactically adjust the pace of gold purchases based on prices in the short term, our survey shows that hedging against geopolitical risks and pursuing reserve diversification remain their main objectives of gold purchases, with price factors not among their primary considerations," Jia said.

Meanwhile, the State Administration of Foreign Exchange said China's foreign exchange reserves stood at $3.4188 trillion at the end of July, up by $2.5 billion, or 0.07 percent, from the end of June.

SAFE said the increase came as the US dollar index declined in July, while prices of major global financial assets showed mixed performance. The combined effects of currency conversion and asset price changes drove the rise in China's foreign exchange reserves, SAFE said.

SAFE added that China's economy has shown strong resilience and vitality as growth drivers continue to shift toward new engines, which is conducive to keeping foreign exchange reserves broadly stable.