China’s PBOC Buys Gold for Eight Consecutive Months, but Gold Prices Remain "Easier to Defend than to Advance"

TradingKey - Since July, gold prices have weakened due to easing geopolitical tensions and a cooling trade dispute. Although the People's Bank of China (PBoC) has been continuously increasing its gold reserves for eight months, providing some support to prices, momentum for a significant rally remains limited — especially as U.S. President Donald Trump escalates tariff threats against BRICS nations amid their de-dollarization efforts.

As of the time of writing (July 7), gold (XAU/USD) was down 0.98% on the day at USD 3,304.28 per ounce, while the U.S. Dollar Index (DXY) rose 0.20% to 97.37. Over the past month, gold prices have declined by approximately 2%.

Gold Price Chart, Source: TradingKey

A strategist from WisdomTree noted that the slight pullback in gold prices may be attributed to a short-term rebound in the U.S. dollar, which reflects continued strength in U.S. economic data and reduces the urgency for the Federal Reserve to cut interest rates immediately.

According to data released last Thursday by the U.S. Bureau of Labor Statistics, nonfarm payrolls in June increased by 147,000 — above the expected 106,000 — while the unemployment rate unexpectedly fell to 4.1% from 4.2%, contrary to expectations of a rise to 4.3%. A resilient labor market has largely eliminated market hopes for a Fed rate cut in July.

On July 7, data from the State Administration of Foreign Exchange showed that China’s central bank held 73.9 million ounces of gold reserves as of end-June, up 70,000 ounces from May’s 73.83 million. This continues the trend of steady accumulation seen over recent months — with 60,000 ounces added in May and 70,000 in April.

While gold underperformed compared to the S&P 500’s record highs, it has still gained around 25% year-to-date. Central bank demand globally remains a key driver behind gold’s upward trend, with China leading the way in the global de-dollarization movement.

However, President Trump recently issued a fresh warning about this trend. As the BRICS summit was held in Rio de Janeiro, Brazil, Trump posted on social media that any country aligning with anti-American policies of the BRICS bloc would face an additional 10% tariff, with no exceptions.

Trump did not specify what constitutes “anti-American policy.” Previously, he had stated that if BRICS countries abandon the U.S. dollar in bilateral trade, he would impose 100% tariffs.

Economists also point out that Trump’s large-scale tax cuts are likely to significantly expand fiscal deficits — a factor that supports gold in the long run. Peter Schiff, a well-known gold bull, wrote on July 6 that Trump’s tax cuts will worsen budget deficits without boosting real economic growth. Instead, they could lead to higher long-term interest rates and inflation.

Schiff further warned that when reciprocal tariffs return, a sharp decline in the U.S. dollar, Treasury bonds, and equities could reoccur.

Yet from current market expectations and investor sentiment, markets appear calm ahead of the July 9 deadline for the expiration of reciprocal tariff suspensions. Analysts suggest this reflects renewed bets on the so-called TACO trade (Trump Always Chickens Out ), where investors anticipate Trump might once again delay negotiations or postpone the effective date of new tariffs.

Citigroup pointed out that in a so-called "Goldilocks" environment of moderate economic growth and mild inflation, gold typically performs poorly, while tech and growth stocks tend to benefit the most.