Central bank gold demand contracted to lows not seen in more than half a decade in the first quarter as Chinese purchases of the precious metal stalled, the World Gold Council (WGC) said in a report Thursday.
The official sector added only 76 tonnes of bullion to its holdings in the first three months of the year, down more than 25 percent when compared to the year-prior and its lowest quarterly level since 2011.
Year-on-year gold demand overall slumped 18 percent, according to the WGC's latest Gold Demand Trends report, as Chinese buying came to a standstill.
China, the world's biggest market for the safe haven asset, reportedly held off making any additions to its gold reserves since October, the first time Beijing has done so since it started releasing quarterly reserves data in 2015.
Lack of gold purchases
WGC's Head of Market Intelligence Alistair Hewitt suggested a shift in foreign exchange reserves and China's relatively high reserve holdings could help explain the apparent lack of buying activity from Beijing.
"China's gold (reserves) remains comfortably above 2 percent, reaching as much as 2.4 percent as the gold price rose during Q1… This is its highest share since the early 2000s, and may partly explain the lack of gold purchases in recent months," WGC researchers said in the report.
Gold prices fell to six-week lows on Thursday as the dollar soared to hit two-week highs on reports the U.S. Federal Reserve may look to raise interest rates as soon as June.
Spot gold slipped 0.26 percent to $1,234 per ounce during lunchtime trade on Thursday, extending losses from the previous session when the commodity had posted its worst single one-day decline since late November.
"Price beats politics in the physical market, and private investors chose overall to take profit on gold bullion in April," Adrian Ash, head of research at BullionVault, said in a note.
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