The People's Bank of China's gold reserves remained unchanged in May, at 2,264 tonnes. This pause in gold buying in May snapped an 18-month streak of accumulation by China’s central bank:
After a fairly strong trading session on Thursday, the gold market did not like the news of China pausing its gold purchases:
Gold (30-minute)
Front-month gold futures were trading above $2,400/oz as of 1am EST, however, the combination of the news from China and an alleged +272k non-farm payrolls print in the US sent the yellow metal tumbling more than $70/oz.
On June 2nd, I laid out the case for a messy month of June in precious metals. I see no reason to change that assessment. In fact, with so much uncertainty surrounding Fed interest rate cuts and an increasingly complex geopolitical backdrop, things are likely to get even messier.
To be clear, if you were one of the largest buyers in a particular market and you wanted to buy at a lower price, you would say that you have stopped buying. China has always been a price sensitive buyer and I didn't expect them to drive the gold price above $2,500 in a straight line.
A 1-2 month break in buying was to be expected.
The price signal they are sending is that $2,400 is where they draw the line, for now.
Gold has important support near $2,310, then $2,286 and $2,210. $2,400 is clearly a big resistance level until further notice.
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