According to anonymous sources, the People’s Bank of China (PBOC) allowed some commercial banks to buy foreign currencies to pay off its gold import after the central bank expanded gold import quotas last month.
This adjustment happened when gold rallied due to market volatility, caused by the U.S. President Donald Trump’s trade war.
Besides the volatility, the trade war also strengthened several Asian currencies as traders shifted from carry trade and U.S. dollars.
A boost in gold purchase could help easing the yuan rally, damaging Chinese exporters that are already struggling with high import tariffs in the U.S. Data showed that new export orders in April have slumped. With the adjustment along with other stimulus measures China recently released, the impact from trade war could be softened.
PBOC has continued adding its gold reserves since November last year despite seeing its price rise to $3,500 per ounce last month. Afterall, gold is seen as a safe asset, especially during high uncertainty time.
