China: 'Gold is for preserving the value of our reserves'

China buys gold to maintain the safety, liquidity and value of its international reserves. The precious metal can also increase the value of the total reserves. Wang Chunying, spokesman for the State Administration of Foreign Exchange, said in a statement to the Global Times.

She added that gold has always been an important component for diversifying central banks' reserves. Chunying had this to say about it:

"Gold combines different properties of finance and commodities to optimize the risk/return ratio of reserves. From a long-term strategic perspective, we will dynamically adjust the allocation of reserves, as necessary to maintain the safety, liquidity and value of the reserves."

It State Administration of Foreign Exchange (SAFE) is responsible for managing China's foreign exchange reserves and gold stockpiles. Every month, this organization publishes an overview of the total foreign exchange reserves and gold reserves. These figures show that the country has been active in the gold market again since December last year. Since then, China has more than 80 tonnes of gold in its reserves added.

Gold is used to preserve the value of reserves

It was already known that central banks own gold as a form of diversification. More strikingly, the spokesperson for the State Administration of Foreign Exchange is now also talking about an increase in the value of reserves in relation to gold. In doing so, it suggests that the value of the gold stock will continue to rise. In recent months, the Gold price investors are already on the rise, as investors anticipate new stimulus measures by central banks.

Also noteworthy is the timing of this statement, as several central banks announced the end of the Central Bank Gold Agreement just last week. Announced. Several European central banks wrote in a statement that gold remains an important part of their reserves. They also announced that they have no plans to sell gold on a large scale. As a result, a new agreement on coordinated gold sales would have become superfluous.

China's State Administration of Foreign Exchange seems to be taking this opportunity to align itself with the position of European central banks. For the Chinese central bank, the gold stock is also an important part of the reserves. Both from a diversification point of view and from a value preservation point of view.