【TMGM Financial Recap】China’s Central Bank Has Increased Its Gold Holdings for 21 Consecutive Months, with Purchases Accelerating Significantly in July

This marks the 21st consecutive month of gold purchases by China’s central bank.

Looking at the monthly data since the beginning of this year: 40,000 ounces were added in January, 30,000 ounces in February, 160,000 ounces in March, 260,000 ounces in April, 320,000 ounces in May, 480,000 ounces in June, and 640,000 ounces in July. Since March, the pace of purchases has increased month by month, with July’s monthly purchase volume setting a new record for the current 21-month buying cycle. Since resuming gold purchases in November 2024, China’s central bank has accumulated approximately 102 tonnes of gold.

There is a direct trigger behind the central bank’s accelerated gold purchases in July. After the June Federal Reserve meeting sent more hawkish signals than the market had expected, international gold prices fell sharply that month. Although international gold prices at the end of July were roughly unchanged from the end of June, the average international gold price in July was 4.0% lower than in June. With gold prices fluctuating at relatively low levels, the central bank increased its purchases in the opposite direction.

Looking at the trend since the beginning of the year, the central bank’s operations show clear characteristics of “counter-cyclical allocation.” When international spot gold prices surged to a record high of $5,706/ounce at the end of January, the central bank made only a small purchase. Gold prices then plunged, with the second quarter seeing the largest quarterly decline in 13 years. By the end of June, prices had fallen below $3,950/ounce at their lowest point, representing a nearly 30% decline from the peak. The deeper gold prices fell, the larger the central bank’s monthly gold purchases became.

China’s Long-Term Drivers for Gold Purchases

The fundamental reason behind the central bank’s 21 consecutive months of gold purchases is that global political and economic conditions have undergone new changes since the current US administration took office. This means that despite gold prices remaining near historical highs, the need to increase gold holdings has risen from the perspective of optimizing the structure of international reserves.

The credibility of the US dollar system is facing challenges. The US fiscal deficit is expanding rapidly, while soaring military spending is pushing the deficit higher. The Federal Reserve’s independence has also recently come under market scrutiny following reports that Worsh has had multiple private phone calls with Trump. Against the backdrop of rising geopolitical risks and increasing uncertainty surrounding the US dollar system, gold, as a reserve asset with “no sovereign credit risk,” is becoming more strategically valuable.

The global central bank gold-buying trend continues. According to the World Gold Council, global central banks and other official institutions collectively added 289 tonnes of gold to their reserves in the second quarter, up 62% year-on-year, with gold purchases by central banks in multiple countries picking up. Global central bank gold buying is not an isolated phenomenon in China, but part of a broader systematic global trend.

At the same time, one figure is worth noting. As of the end of 2025, among China’s official international reserves, which mainly consist of foreign exchange reserves and gold reserves, gold accounted for approximately 8.8%. According to data from the European Central Bank at the end of 2025, gold accounted for 27% of all reserve assets held by central banks worldwide.

China’s current share of gold reserves is clearly relatively low, leaving considerable room for further increases. Even assuming an annual increase of around 20 tonnes, it would take a considerable period of time to reach the global central bank average. This means that the central bank’s gold purchases are likely to represent a long-term structural adjustment in reserve allocation rather than a short-term tactical operation.

In addition, gold is a widely accepted means of final payment globally. Increasing gold holdings can strengthen the credibility of the sovereign currency and create favorable conditions for steadily advancing the internationalization of the renminbi.

Further Purchases Remain Highly Likely

Based on a comprehensive analysis of various factors, continued gold purchases by the central bank remain highly likely. This is because changes in the global political and economic landscape will not reverse in the short term, while China’s relatively low share of gold reserves is also unlikely to change significantly in the short term.

The UBS Chief Investment Office expects that, considering the possibility of declining US yields, further weakening of the US dollar, and continued gold purchases by central banks, gold prices could break above $5,000/ounce in the first half of 2027.

However, some institutions remain relatively cautious. In August, Standard Chartered lowered its three-month and 12-month gold price targets to $4,300/ounce and $4,600/ounce, respectively. In the short term, gold price movements will remain highly dependent on changes in geopolitical risks, fundamental economic data, and the validation of policy signals.

The central bank has increased its gold holdings for 21 consecutive months, with July’s monthly purchase of 640,000 ounces setting a new high for the current cycle. In the short term, the decline in gold prices in July provided a window for counter-cyclical allocation; in the long term, changes in the global political and economic landscape are prompting central banks worldwide to systematically reassess the role of gold in reserve assets. For China, the gap between 8.8% and 27% means that this process still has a long way to go.