China has been adding gold to reserves for nine months

China added gold to its reserves in August for the ninth month in a row added. The central bank bought 5.91 tonnes of gold last month, meaning it has already added almost 100 tonnes to its reserves since December last year. China started buying gold again in December last year after a pause of more than two years to further diversify its reserves. The country now has a gold reserve of more than 1,942 tonnes, good for sixth place in the ranking of countries with the largest gold reserves.

Over the past decade, China has added gold to its reserves at various times. Compared to the level before the 2008 crisis, the total gold supply has even tripled. Nevertheless, the country still has relatively little precious metal. Of the total reserves of more than $3 trillion, 'only' $95 billion consists of gold, converted to about 3%. Most of it is made up of foreign exchange reserves, mostly in the form of dollar reserves.

China sees gold as a safe haven

Several central banks have added gold to their reserves in recent years. Last year, they bought with a total of 650 tonnes even the most gold since 1967. Increased geopolitical tensions and uncertainty about the monetary system are the main reasons to buy gold. Central banks also see gold as a form of diversification, because the precious metal has no counterparty risk. In an environment of increased uncertainty and a looming trade war between the second largest economies, the precious metal is back in the spotlight as a safe haven.

For China, the trade war with the United States could be a reason to buy gold. So far, this strategy has paid off, as the increase in the number of Gold price the value of the precious metal has increased significantly. In one year, the value of the gold reserve has risen from $71 billion to $95.5 billion. China values its reserves every month at their current market value. That explains the rapid increase in value over the past few months, as the yellow line in the graph below shows. The blue line represents the size of the official gold supply in metric tons.

China's central bank has bought nearly 100 tonnes of gold since December