In May, the People’s Bank of China did not increase its gold reserves for the first time in 18 months. Does this signal the end of gold purchases by China and the announcement of other moves?
The past week has continued to see declines in gold prices. On Monday, June 3rd, an ounce of gold was valued at approximately $2,330, and by Friday’s session, gold ended at just under $2,290 per ounce. This is a correction caused by two factors.
ECB Cuts Rates, and China Stops Buying Gold
The first factor is news from the European Central Bank, which lowered interest rates. Gold reacted because it appears that other central banks, especially the U.S. Federal Reserve, may soon follow the ECB’s lead. The market is preparing for this.
The second factor, even more significant than the ECB’s decision, was the information that in May, China did not buy gold for the first time in 18 months. The last occurrence was in October 2022, and currently, China’s gold reserves exceed 2,264 tons.
For many, this indicates that China might have finished its gold purchases as planned and is preparing for another move. What exactly could this be? We don’t know yet, but it’s worth watching closely what happens in China.
U.S. Elections Crucial for Gold
The third important news from recent days comes from Ray Dalio, one of the world’s wealthiest people. During his speech at an economic forum in Hong Kong, he stated that the most important event of the year for gold would be the U.S. elections.
This is not only because it is always a significant event for the global economy but primarily because it could lead to many unforeseen consequences and disruptions in the United States itself. The country might become divided.
Neither China Nor the U.S. Will Relinquish Taiwan
This could lead to significant economic turmoil, which China might want to exploit. Ray Dalio even mentioned that before any military option, certain economic actions are usually taken.
Of course, Dalio also assumes—and this is probably the most likely scenario—that no extensive military aggression around Taiwan will occur. Although China would lose more from its blockade than the U.S., economic disruptions are still likely because neither the U.S. nor China will relinquish Taiwan.
What Will the NBP Do?
As for Poland, the National Bank of Poland, through its president Adam Glapiński, announced that there would be no interest rate cuts this month and not to expect cuts at all this year.
In the past, we’ve heard radical statements from President Glapiński that changed much faster than anticipated. Will NBP’s policy on rates change by the end of the year? It all depends on the state of the economy.
The FED’s Headache
Meanwhile, the whole world is watching September and whether the FED will indeed cut interest rates. On Friday, new data on the U.S. job market was released, showing much better results—by about one-third more than expected. Over 272,000 new jobs were added last month, while analysts expected 180,000.
Jerome Powell and the entire FED team will now ponder what to do next. Everyone expected the job market to cool, but instead, there was a surprise. These are preliminary data that might be revised, but the situation is incredibly dynamic and worth watching.
ETFs Are Buying Gold Again
All these events will influence the gold price in the near future, which, according to some analysts, will reach record highs again in the second half of this year. Although China isn’t buying gold, other countries and central banks are.
According to the World Gold Council, ETFs started buying gold again last month. This is a clear sign that the future looks bright for the gold market, with activity expected not only in prices but also in demand among citizens.
