China halted buying gold for reserves in May after the precious metal surged to a record high, ending an 18-month buying spree. Gold held by the People’s Bank of China was unchanged at 72.80 million troy ounces in May, according to data released last week. This marked the first time the country’s central bank did not add to its reserves since October 2022. This has left gold vulnerable to more downside pressure.
Gold demand from central banks posted its strongest start to any year on record in the first quarter, with China being the biggest buyer. Gold tends to become more attractive in times of instability when investors pile into safe-haven assets as a hedge against the economic climate, geopolitical tensions or inflation.
China’s appetite for gold started to fade in April, when the People’s Bank of China bought only 60,000 troy ounces, down from 160,000 ounces in March, and 390,000 ounces in February. Gold’s record-breaking rally might dent demand for now.