Taking advantage of the low price of gold, in November China boosted its gold holdings for the fifth consecutive month, the fastest growth rate since June, the central bank reported Tuesday.
However, November’s $87 billion decline in total foreign exchange reserves was the country’s biggest drop since August’s record-high decline of $93.9 billion.
The People’s Bank of China said that gold reserves rose by 670,000 fine troy ounces, or 20.84 metric tons, to 56.05 million ounces, or 1,743.35 at the end of November. The PBOC added 14 metric tons of gold reserves in October and nearly 15 tons in September.
Yet, even as the gold holdings rose, with the price of gold falling to $1,074 Wednesday, their lowest level since February 2010, the total dollar value of the gold holdings last month fell to $59.5 billion, from $63.2 billion in October.
“The renminbi has been included in the International Monetary Fund’s Special Drawing Rights basket. The Chinese central bank needs to increase its gold reserves to support a safe and strong currency,” Zhang Yanling, a researcher at the Chongyang Institute for Financial Studies at Renmin University of China, told China Daily. She added that the increase in gold holdings will help to increase the renminbi’s credit rating in the global financial system and further expand its use in international trade and investment
The PBOC’s data also showed that total foreign exchange reserves declined to $3.438 trillion last month from $3.525 trillion in October.
Economists expected that the interest rate increase by the US Federal Reserve Bank, possibly after its meeting next week, could trigger the yuan’s further depreciation.