So far, gold has shown a strong performance in 2024, rising by about 20% since the beginning of this year. Analysts stressed that with the People's Bank of China (PBoC) buying gold in large quantities for 18 consecutive months, China is the main driving force behind the rise.

Although the People's Bank of China has not made further purchases of gold recently, analysts from Capital Economics have stated that the suspension of gold purchases is only temporary, as "China's gold rush still has a long way to go" against the backdrop of increasing global tensions, economic uncertainty, and ongoing efforts to break away from the US dollar.

Analysts said, "Against the backdrop of central bank purchases of gold, strong demand for physical gold, and a surge in ETF holdings, China seems to be the main driving force behind the rise in gold prices earlier this year. Looking ahead, we believe that China's demand for gold will increase. This will bring upward pressure to the gold price and may become a greater source of volatility in the gold market in the coming years

Not only the People's Bank of China has shown interest in gold. The analyst said, "While the People's Bank of China is purchasing gold, the demand for physical gold in China has also risen to pre pandemic levels

The analyst added, "It is crucial that the surge in demand for 'paper gold' assets such as ETFs and futures contracts seems to fuel China's gold frenzy. Compared to the West, this type of demand has a much smaller share in China, but for example, during the price surge from February to April, the funds flowing into Chinese ETFs far offset the outflows from North American ETFs

Kaitou Macro believes that the demand for gold will be higher in the next 10 years, but in the short term, they suggest that the People's Bank of China may continue to suspend further purchases until gold prices fall from record highs.

They warned, "A series of cyclical factors indicate that China's gold demand will weaken in the short term. Price increases have seriously affected jewelry demand, and fiscal stimulus should provide much-needed boost to the economy. Given that we believe the local stock market valuation is low, we expect the stock market performance to rebound

They said, "In summary, the attractiveness of gold relative to other assets may decrease, and China's' safe haven 'demand for gold may weaken. However, the suspension will only be temporary

Analysts said, "We expect China's demand for gold to further strengthen and bring huge upward pressure to the gold price in the remaining ten years. This will affect the investment performance of gold substitutes, thereby enhancing the attractiveness of gold as a safe store of value

One of the biggest factors favorable to gold is that it still only accounts for a small portion of China's foreign exchange reserves. Capital Economics believes that as China continues to reduce its dependence on the US dollar, gold will help fill this gap.

They said, "The People's Bank of China may become a major participant in the global market because it has $3 trillion in reserve assets, but currently 5% of them are gold

They pointed out: "From this perspective, if the People's Bank of China increases the share of gold to 9% of that of India, it will meet the central bank's demand for about 15000 tons of gold - equivalent to about 30% of the global gold demand in 2023. If these purchases are spread over 10 years, it will increase the annual gold demand by about 3%, which will certainly support the gold price."

Therefore, although Kaitou Macro believes that the recent demand for gold from the People's Bank of China is still low, the gold purchasing volume of the People's Bank of China and Chinese citizens will rebound in the next 10 years.

Kaitou Macro pointed out that "the strategic purchases of gold by Chinese investors and the People's Bank of China will mean that changes in Chinese demand will have a greater impact on global gold prices than ever before. We may see more price fluctuations, most of which will lead to price increases