China Buys 21t Gold as Fed and Yields Weigh on XAU
China's central bank bought 21 tonnes of gold in September, yet Fed minutes and a 5.3% yield push XAU toward $4,100.
Key Takeaways
- China's central bank added 21 tonnes of gold in September, the most in three years.
- Gold still slips: Fed minutes, a 5.3% yield and a strong dollar weigh on XAU.
- Gold ETFs hold a record 4,256 tonnes, yet the price stays under pressure.
The People's Bank of China is buying gold while the market slides. Its reserves rise to 2,196 tonnes in September, the 23rd straight month of purchases. Spot gold (XAU) trades around $4,150 an ounce, close to a two-month low.
Beijing uses the weakness for its biggest purchase since 2023
According to Kitco, the Chinese central bank reported a gain of 21 tonnes on Wednesday. That is the largest monthly increase since September 2023, when it was 24 tonnes. Purchases ran at 18.5 tonnes in August and 18 tonnes in July, so buying has stepped up month after month, even as prices fell.
Beijing is acting against the trend. The country's foreign exchange reserves fell by $38.1 billion, or 1.11%, to $3.4 trillion in September. The currency regulator SAFE blames exchange-rate effects and falling asset prices, since the dollar index rallied. In that math, gold serves as a counterweight to dollar holdings.
The World Gold Council (WGC) counts China among the biggest sovereign buyers this year. Analyst Marissa Salim tallies 170 tonnes of net central bank purchases worldwide through August, including 39 tonnes in August alone. Poland leads the annual ranking with 98 tonnes and holds 648 tonnes, bringing its 700-tonne goal closer. China follows with 80 tonnes through August, and the September purchase narrows the gap.
Fed and yields keep the price down anyway
The price is not following the buying for now. FXEmpire analyst Arslan Ali Butt points to the minutes of the Fed's September meeting. All participants backed the 0.25-point hike to a range of 3.75% to 4.00%, and a majority considers another increase appropriate before year-end. Markets price an 18% chance for October and 80% for December.
Rates add to the pressure. The 10-year U.S. yield sits near 5.3%, and the dollar is close to an 18-month high. Gold pays no interest, so holding it gets more expensive at these yields. On Thursday, XAU loses just over 1% to about $4,123, according to FXEmpire. Silver (XAG) falls harder, to $58.95.
Investor demand pushes the other way. Gold-backed ETFs attracted a record $31 billion in the third quarter, per FXEmpire. September alone brought $10 billion, or 67 tonnes, and total holdings hit an all-time high of 4,256 tonnes. Sovereign buyers and ETF investors are positioning for the long run, while short-term trading follows rate expectations.
What momentum says
The momentum signals a mixed picture. On the hourly chart, XAU reads bullish, on the 4-hour chart bearish. The daily chart shows bearish, the weekly chart neutral. The brief rebound therefore lacks support from the larger timeframes. At $4,148.80, the broader trend remains weak.
Scenarios
If gold falls below support at $4,103, FXEmpire sees $4,067 and then $4,032 in focus. That scenario fits a hawkish Fed and further rising yields.
If it clears $4,142 and the descending trendline, $4,184 and $4,226 would be the next levels. That requires yields to ease, for example after weaker U.S. data.
If the price stays between $4,103 and $4,142, the market will likely wait for labor data and the Fed meeting on October 28 before committing.