In a bid to capitalize on lower prices, China's central bank, the People's Bank of China (PBOC), withheld gold purchases for the second consecutive month in June, according to official data released on Sunday. The decision comes after a record high in spot gold prices in May prompted the PBOC to put a pause on its gold purchasing program.

The PBOC had been consistently buying gold for the past 18 months, along with other central banks, which fueled the gold rally that occurred from March to May. However, the recent data reveals that China's gold reserves remained unchanged at 72.80 million troy ounces at the end of June, the same as the previous month. Furthermore, the value of China's gold reserves declined from $170.96 billion to $169.70 billion during the same period.

"It appears that gold prices remain a little too high, and the PBOC is waiting for a further pullback before resuming its gold purchasing program," commented Nitesh Shah, a commodity strategist at WisdomTree.

Over the past two years, the demand for gold from central banks has been on the rise as various countries seek to diversify their foreign currency reserves. In 2023, the PBOC ranked as the largest official sector gold buyer, amassing its largest additions to gold reserves since at least 1977.

According to Shah, current models predict a potential 7% pullback in gold prices this quarter, presenting an ideal opportunity for the PBOC to acquire more gold. However, timing will be crucial, as the strategists believe the metal is likely to rally to all-time highs again shortly after the pullback.

Investors and analysts alike will be closely monitoring the PBOC's next move, as any resumption of gold purchases would likely have an impact on global gold prices. In the coming months, market dynamics and the trajectory of gold prices will ultimately determine whether the PBOC resumes its gold purchasing program or continues to maintain its current stance.