China's central bank recorded its biggest monthly increase in gold reserves since October 2023, extending its buying streak to 20 months despite a sharp fall in bullion prices.

China's central bank added to its gold reserves at the fastest monthly pace in more than two-and-a-half years in June, official data released on Tuesday showed, despite falling bullion prices.

The Chinese central bank extended its gold-buying streak to 20 straight months in June, with the holdings rising to 75.44 million fine troy ounces from 74.96 million a month earlier.

The increase of 480,000 ounces, or nearly 15 metric tonnes, was the biggest monthly addition since October 2023, according to data from the People's Bank of China.

The value of China's gold reserves, however, fell to $303.72 billion at the end of June from $340.75 billion a month earlier, official data showed.

The decline in value came despite the increase in gold holdings, as gold prices dropped sharply during the month.

Spot gold fell 11.65% in June, its steepest monthly decline since October 2008, briefly slipping below the $4,000-an-ounce mark. A stronger U.S. dollar and expectations that the Federal Reserve could keep interest rates higher for longer weighed on prices.

Concerns that inflation could remain elevated despite peace talks related to the Iran conflict also weighed on market sentiment.

Gold is widely regarded as a safe-haven asset during periods of economic and geopolitical uncertainty. Central banks have been increasing their gold holdings in recent years as part of efforts to diversify their foreign exchange reserves and reduce dependence on the U.S. dollar.

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According to Reuters, central banks around the world have remained among the largest buyers of gold in recent years, even as prices have remained volatile.

Separately, China and Hong Kong have announced steps to boost Hong Kong's position as a regional gold trading and storage centre.

Reuters also reported that the measures include a new central gold clearing system, increased storage capacity, and new trading infrastructure to support the international use of the yuan.