China, the world’s biggest producer and consumer of gold, cut bullion purchases in July as prices soared to the highest level since 2014 after the U.K. voted to leave the European Union.
The People’s Bank of China increased holdings by 170,000 ounces to 58.79 million ounces, or about 1,829 metric tons, according to the central bank. That was the smallest addition since it started to disclose monthly purchases about a year ago, save for May when it bought nothing. The nation announced last year that its hoard has jumped 57 percent since 2009.
Gold advanced to $1,375.34 an ounce on July 11, the highest in more than two years, as investors grappled with the fallout from the U.K vote and lowered expectations for an interest-rate increase by the Federal Reserve. A stronger-than-expected U.S. jobs report Friday has increased odds of a rate hike this year, which would be negative for bullion as it doesn’t pay interest.
While China has the fifth-biggest stash by country, its holdings make up only 2.3 percent of total reserves, compared with 76 percent in the U.S. and 70 percent in Germany, according to the World Gold Council.
The country will continue to diversify its foreign currency reserves because the percentage held in gold is very small, but they’ll also be monitoring the outlook for the dollar, interest rates and gold prices, Helen Lau, an analyst at Argonaut Securities Asia Ltd., in Hong Kong, said by phone and e-mail Monday.