As announced by the central bank of the People’s Republic at the end of last week, China has expanded its gold reserves for the seventh consecutive month in May. According to the World Gold Council, the gold holdings of the People’s Bank of China increased by two tons last month. This means Beijing has already acquired 17 tons of gold this year, increasing its reserves to 2,296 tons.
At the end of May, the value of these reserves stood at $241.99 billion, down from $243.59 billion at the end of April, after the gold price couldn’t maintain the record high of $3,500 per ounce reached in April. This had, of course, significantly increased the value of China’s gold holdings at that time.
In 2024, China’s central bank had not purchased gold for six months, after previously expanding its reserves for 18 consecutive months. However, following the election of US President Trump last November, the People’s Bank of China resumed its gold purchases.
Beijing Aims to Build Shanghai as a Counterpart to the LME
The People’s Republic has recently taken steps to reduce its control over the country’s gold market. On May 27, the Shanghai Futures Exchange (SHFE) announced that it would open China’s domestic futures market for direct participation by foreign investors and brokers.
The SHFE has already published 34 proposals covering a wide range of trading activities, from trading gold and silver options to hedging and precious metal futures. The exchange stated that the goal is the “full introduction of foreign participants” and support for the internationalization of the Renminbi.
Foreign actors will also be able to trade directly on the Shanghai Stock Exchange in the future, without having to go through a Chinese partner. Additionally, market participants will be allowed to deposit margins in US dollars and other foreign currencies.
Many observers see these planned steps as a further move in Beijing’s strategy to bring the country’s influence on the trading and price discovery of commodities like gold and silver to the same dominant level it has already achieved in the production and consumption of these materials.
Among other things, Chinese authorities announced in April that they wanted to push forward with the internationalization of the Shanghai Stock Exchange. The goal is to establish Shanghai as a competitor to the London Metal Exchange (LME) and ultimately gain control over global price discovery.
The Chinese central bank did not specify which products would be at the forefront. However, precious metals such as gold, silver, and platinum are primarily traded in Shanghai.
