China reportedly started positioning itself as custodian of foreign sovereign gold reserves using the People’s Bank of China’s Shanghai Gold Exchange to court “friendly” central banks, soon poised to undermine West’s leadership in the yellow metal’s reserve.
According to Bloomberg, the PBOC has spent recent months urging partner central banks to buy bullion and store it inside China, with at least one Southeast Asian country showing interest. Reserves would be held in custodian warehouses linked to the SGE International Board, the venue the PBOC established in 2014 for foreign counterparties. The bullion would be new purchases credited to the foreign holder’s reserves—not transfers from existing stockpiles.
The news sends spot gold up as much as 1.2% to $3,787.2 per ounce. Goldman Sachs has suggested gold prices could reach $5,000 per ounce if just 1% of privately-held US Treasury holdings rotate into gold.
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The initiative leans on a structural tailwind: central bank demand has been a key pillar of gold’s run to records, and the PBOC has purchased for ten straight months, reinforcing Beijing’s push to lessen dependence on the US dollar and on Western financial centers.
The Bank of England holds 5,000+ tons for the world’s reserves, anchoring London’s primacy. By contrast, reported Chinese official holdings are less than half that level, ranking 5th globally according World Gold Council info, even as China remains the largest domestic market for jewelry and investment bars.
This year, the SGE launched its first offshore vault and contracts in Hong Kong to grow yuan-denominated trading and the PBOC eased gold-import restrictions.
Information for this story was found via Bloomberg and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
