China's Gold Rush Is Triggering Unintended Consequences for Bitcoin Price

China is loading up on its gold holdings, racking up five tonnes in a frenetic accumulation spree over the last month.

China is rapidly accumulating gold, adding five tonnes to its reserves last month, and the move might be having an effect on Bitcoin price.

According to the Kobeissi Letter, the People’s Bank of China (PBoC) has been scooping up gold in preparation for a Strategic Bitcoin Reserve. But recent reports by the PBoC on its gold reserves and new tariffs announced by U.S. President Donald Trump have crypto traders baffled.

China Commences Accumulation Of Gold

PBoC disclosed that it had increased its gold holdings in July to 78.64 tonnes, kicking off speculation that the Asian nation is preparing to create a Strategic Bitcoin Reserve.

The new figures from the PBoC come after China’s central bank disclosed a slight decrease in foreign-exchange reserves in June. The PBoC’s forex holdings clocked $3.126 trillion at the end of June, decreasing from May’s $3.136 trillion.

The disclosed decrease in foreign-exchange reserves and the buildup of gold come amid a whirlwind of macroeconomic blows. Fresh data showed that China’s services activity slipped in July.

China’s service sector activity lost some steam in July, with the Caixin services PMI coming in at 51.8 in July, compared to June’s three-month high of 52.7. Economists polled by Reuters had anticipated a slight slip to 52.0.

The new reading indicates an expansion in activity for a 14th consecutive month but at the slowest pace in four months. The slight slowdown in services sector activity comes after the country’s manufacturing sector also showed signs of slowing down.

Bitcoin Price Reacts To PBoC

The new data comes after the PBoC disclosed that it had upped its gold reserves for the fifth month in a row.

Earlier this month, Trump announced a 245% tariff on all remaining goods from China, in a final blow to the trade war. The new tariffs are set to take effect on August 1, and they will take the total tariffs levied on Chinese goods to $540 billion.

The new tariffs come after the two presidents met at the G20 summit in Japan last month, with both sides agreeing to resume trade talks. However, the talks broke down after the U.S. accused China of backtracking on commitments made during the negotiations.

China is buying Bitcoin. How do we know? Because they are buying gold again. People's Bank of China added 5T of gold last month to its reserves. Small change for the world's largest economy, but it has crypto traders speculating about a "Strategic Bitcoin Reserve."

The good news for Bitcoin bulls is that China is known to prefer bulk buying in times of need. Notably, the PBoC disclosed in December 2018 that it had no Bitcoin holdings. But in 2013, the bank bought 577 tonnes of gold over two years.

After slashing its foreign-exchange reserves by nearly $1 trillion in a two-year period to reach a six-year low in 2019, the PBoC has been disclosing a buildup of its forex holdings.

The new figures from the PBoC come as the Chinese yuan continues to slide to 2007 lows against the U.S. dollar.