China’s continued gold accumulation points to a structural shift in reserve management, even as price volatility exposes the risks and contradictions of the current gold boom.
China’s central bank extended its gold-buying streak for a 15th month in January, reinforcing a long-term reserve strategy that appears increasingly detached from short-term price swings and domestic consumption trends, even as the global gold market grapples with extreme volatility.
Data from the People’s Bank of China (PBOC) showed that the country’s official gold holdings edged up to 74.19 million fine troy ounces at the end of January, from 74.15 million ounces in December. While the incremental increase was small, the persistence of the buying matters more than the volume. It signals that Beijing continues to treat gold as a strategic reserve asset rather than a tactical trade, despite sharp fluctuations in global prices.
The value of China’s gold reserves rose sharply to $369.58 billion at the end of January, up from $319.45 billion a month earlier. That jump was largely driven by price effects, underscoring how volatile gold markets can amplify changes in reserve valuations even when physical purchases are modest.
January was one of the most turbulent months for gold in recent years. Prices surged to a record near $5,600 per ounce during a speculative run fueled by geopolitical uncertainty, aggressive positioning by investors, and expectations of looser U.S. monetary policy. The rally proved fragile. Following the nomination of Kevin Warsh as the next chair of the U.S. Federal Reserve late in the month, gold prices fell sharply, dropping to as low as $4,403.24 per ounce earlier this week before rebounding to around $4,960.
That whipsaw has highlighted the risks of short-term speculation in gold, but China’s continued buying suggests the central bank is largely indifferent to near-term price direction. For policymakers in Beijing, gold serves as a hedge against currency risk, financial sanctions, and broader geopolitical uncertainty, particularly at a time when trust in the dollar-centric global financial system is being questioned by several emerging economies.
China has been one of the most consistent official buyers of gold globally over the past two years, alongside other central banks seeking to diversify reserves. Although the PBOC briefly halted purchases in May 2024, ending an 18-month buying streak, it resumed accumulation six months later. That pause was widely interpreted as a tactical breather rather than a change in policy, and the subsequent resumption has reinforced expectations that gold will remain a core component of China’s reserve strategy.
Despite the sustained buying, gold still accounts for a relatively modest share of China’s total foreign exchange reserves compared with the United States and major European economies. That leaves room for further accumulation over time, particularly if Beijing continues to prioritize diversification away from dollar-denominated assets.
At the same time, China’s domestic gold market is moving in a different direction. Total gold consumption fell for a second consecutive year in 2025, declining 3.75% to 950 metric tons, according to the state-backed China Gold Association. The drop reflects weaker jewelry demand amid slower economic growth and cautious household spending.
Yet beneath that headline figure lies a notable shift in behavior. Purchases of gold bars and coins surged 35.14% in 2025, accounting for more than half of total gold consumption. This rise in investment demand points to heightened risk aversion among households, many of whom have grown wary of property, equities, and other traditional stores of wealth.
The contrast between falling overall consumption and booming investment demand highlights how gold is increasingly being used as a financial shelter rather than a consumer good. It also mirrors broader economic anxieties, as Chinese savers seek protection against uncertainty at home and abroad.
China’s official gold purchases and the shift in domestic demand mean that the metal is now playing an integral role in the country’s financial landscape. For the central bank, gold remains a tool for strategic insulation rather than short-term profit.
Last week, the flagship ideology journal of China’s Communist Party published remarks from President Xi Jinping that outlined plans to turn the renminbi into a global reserve currency. Currently, the US dollar plays that role – the main currency for the vast majority of foreign transactions.
According to the journal Qiushi, Xi told government officials that China should aspire to establish “a [gold-backed] strong currency widely used in international trade and foreign exchange,” with a “powerful central bank” and the ability to attract investment and influence global pricing.
However, China’s steady accumulation provides an underlying source of support for gold prices, even when speculative rallies unwind abruptly. While sharp corrections expose the risks of momentum-driven trading, sustained central bank demand suggests that gold’s strategic appeal remains intact.
With global monetary policy, geopolitics, and financial fragmentation continuing to shape investor behavior, Beijing is signaling by its actions that gold is likely to remain a central pillar of its long-term financial planning, regardless of short-term turbulence in prices.
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