On January 7, the State Administration of Foreign Exchange (SAFE) released data on the size of foreign exchange reserves at the end of December 2023. According to the data, affected by the monetary policies and expectations of major economies, as of the end of December 2023, China's foreign exchange reserves reached a two-year high of US$3,238 billion. The People's Bank of China (PBOC) continues to increase its holdings of gold reserves, increasing month-on-month since November 2022, marking the 14th consecutive month of accumulation.
foreign exchange reserve
Affected by the monetary policies of major economies
The scale is back above $3.2 trillion
According to statistics from the State Administration of Foreign Exchange, as of the end of December 2023, the size of the mainland's foreign exchange reserves was US$3,238 billion, a two-year high, and an increase of US$66.2 billion, or 2.1%, from the end of November.
According to the State Administration of Foreign Exchange, in December 2023, affected by factors such as monetary policies and expectations of major economies, the US dollar index fell, and global financial asset prices rose overall. Factors such as exchange rate translation and changes in asset prices combined to increase the scale of foreign exchange reserves in the month.
Wen Bin, chief economist of Minsheng Bank, further analyzed that in terms of currency, the US dollar exchange rate index fell by 2.1% to 101.3 in the month, and the non-US dollar currency-denominated assets appreciated overall after being converted into US dollars. In assets, the dollar-denominated hedged global bond index rose 3.2% and the S&P 500 stock index rose 4.4%.
"Foreign exchange reserves increased by $66.2 billion in December 2023, mainly due to two aspects, a premium on exchange rate translation and a book surplus due to rising asset prices. Zhao Qingming, vice president of the Institute of Exchange Management, said that in terms of exchange rate, the dollar index fell by 2.1% in December last year, and the yen, euro, and pound sterling appreciated to varying degrees against the dollar, especially the yen appreciated very high. Bond prices in Europe and elsewhere have risen to varying degrees.
The U.S. dollar index continued to decline in December 2023, and the renminbi appreciated against the U.S. dollar for two consecutive months. In December 2023, the central parity of RMB against the US dollar appreciated from 7.1018 at the end of November to 7.0827 at the end of December, with a cumulative appreciation of 191 points, or 0.27%. The spot exchange rate of the RMB against the US dollar appreciated from 7.1310 in the last month of 2023 to 7.0920 at the end of the year, with a cumulative appreciation of 390 points, or nearly 0.55%.
"With the steady improvement of the mainland economy, the diversified development of the foreign trade market, the continuous optimization of the export structure, the continuous enhancement of the resilience of foreign trade, the Fed's expectation of interest rate cuts has also narrowed the interest rate gap between China and the United States, and the inflow of foreign capital under the capital account has begun to increase, which is conducive to the overall stability of the balance of payments and lays a solid foundation for the recovery of the mainland's foreign exchange reserves. Wen Bin said.
According to the report, China is the world's largest foreign exchange reserve. "Broadly speaking, China's foreign exchange reserves have remained largely stable at $3.2 trillion over the past year, and even over the past three years. In the future, taking into account changes in exchange rates and asset prices, foreign exchange reserves can still stabilize at the level of 3.2 trillion US dollars. Zhao Qingming said.
Looking ahead, the State Administration of Foreign Exchange said that the mainland's economy continues to rebound and high-quality development is solidly promoted, which will provide support for the scale of foreign exchange reserves to remain basically stable.
The 2024 National Foreign Exchange Management Work Conference held from January 4 to 5 proposed to improve the operation and management of foreign exchange reserves with Chinese characteristics and ensure the safety, liquidity, preservation and appreciation of foreign exchange reserve assets.
Gold reserves
央行“囤金”已“十四连增”
Last year, central banks bought gold aggressively
According to the latest data released by the People's Bank of China, as of the end of December 2023, the mainland's gold reserves were reported at 71.87 million ounces, an increase of 290,000 ounces from 71.58 million ounces at the end of November. So far, the central bank of China has increased its gold reserves month by month since November 2022, during which a total of 9.23 million ounces have been added.
Experts said that gold has the attributes of hedging, anti-inflation, long-term value preservation and appreciation, and increasing gold reserves in the allocation of international reserve portfolios is conducive to dynamically balancing the safety, liquidity and profitability of international reserves, and is conducive to coordinating and maintaining the safety, liquidity and profitability of international reserves.
Gold has long played an important role in central bank reserve management, and central banks are the most important holders of gold. According to the World Gold Council, central banks continued to buy gold aggressively last year, with a net increase of 42t in global official gold reserves over the month.
According to the World Gold Council's Q3 Global Gold Demand Trends Report, global central banks bought 337t of gold in Q3, the third highest quarterly net purchase on record, with a total of around 800t in the first three quarters, up 14% on a year-on-year basis.
Among them, 11 central banks bought more than 1t, with the central banks of China, Poland and Turkey in the top three, adding 181t, 57t and 39t respectively.
In addition, the World Gold Council's 2023 Central Bank Gold Reserves Survey showed that central banks in economies continue to have a positive attitude towards gold, with 24% of central banks surveyed intending to increase their gold reserves in the next 12 months, and 62% of central banks surveyed saying that gold's share of total reserves will rise in the future, compared to 42% in the previous year.
The central bank continued to buy gold, which played a relatively strong role in supporting gold prices. As of the end of 2023, COMEX gold has risen 13.45% for the year, and is the largest annual increase since 2020. On December 4, 2023, the international gold price once broke through the $2,100 per ounce mark, hitting a record high.
Looking ahead, Goldman Sachs raised its gold price targets for the next three, six and 12 months to $2,065, $2,125 and $2,175 per ounce.
After two years of consolidation after the pandemic, gold hit two all-time highs in 2023: once in May and once in December, when gold tried to shake off the key resistance level of $2,000, where it had been sold off several times. The Fed is currently expecting three rate cuts in 2024, and the gold price is already above this point: "Given the favorable macro backdrop and a biased number of technical indicators, gold prices are expected to hit new records in 2024." Our targets for gold in 2024 are $2,200 and $2,360. ”
In anticipation of a rate cut by the Federal Reserve, gold still has a chance to hit record highs in early 2024. On the one hand, global inflationary pressures continue to weaken, and the tone of major overseas central banks has also begun to change in 2023, from super "hawkish" to moderate, which will be positive for gold prices. On the other hand, the market expects the Fed to start cutting interest rates as early as the end of the first quarter of 2024, which will also push gold prices higher.
Integration: Shi Minglei
Source: Xinhua News Agency, People's Daily Online, China Securities Network, Reference News Network