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Could China’s Massive $2.5 Billion Gold Buying Spree Create a Supply Squeeze?
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Could China’s Massive $2.5 Billion Gold Buying Spree Create a Supply Squeeze?
In case you missed it, China's central bank has quietly returned to the gold-buying game — and it's not playing small. The People's Bank of China (PBOC) bought up 30 metric tons of gold recently, marking one of the biggest monthly spikes we've seen from them.
We’re talking about a major haul here: 30 metric tons translates to 964,500 troy ounces. Now, if you’re doing the math at $2,600 an ounce, that’s a $2.5 billion purchase — no pocket change, even in an $18 trillion dollar market.
But here’s the kicker: While the global gold market might have a massive capitalization on paper, only a fraction of that value would be realized if everyone suddenly decided to cash out.
In reality, there’s likely only around $1.8 trillion in liquid gold, meaning this buy-up isn’t as “small” as it seems at first glance.
China’s big buy also raises a pressing question: What’s behind this sudden appetite for gold?
One possible answer is supply — or, more specifically, an anticipated squeeze on it. As central banks, investors, and even the PBOC pile into gold, supply could tighten, potentially pushing prices higher.
We’ve seen how influential central bank buying can be on commodity markets, and gold is no different. Each ton they scoop up eats into the available pool, creating what some analysts would call a “supply shock.”
In the immediate aftermath of China’s purchase, gold has continued its bullish march, touching all-time highs. And this isn’t just a blip…
It aligns with a larger trend of central banks — not just China — returning to gold as a hedge. In today’s economic climate, with inflation still biting and the Federal Reserve signaling caution, gold is increasingly seen as a safe-haven asset.
The PBOC’s buying spree isn’t a random one-off event. It could signal a longer-term commitment to diversifying its reserves.
Central banks often make strategic decisions about reserve allocations, and gold is as solid as it gets — especially during uncertain times. While it’s difficult to predict the exact future trajectory, the fundamentals here paint a strong picture for gold’s demand remaining high.
Investors should keep a close watch on these moves.
With only so much gold available to meet demand, every ton that China buys could mean fewer ounces in circulation — and that could have a direct effect on market prices. For traders looking at gold-backed assets, it’s worth keeping this potential supply squeeze in mind.
Today’s Daily Chart Setup: New Jersey Resources (NJR)
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