People’s Bank of China extends gold buying streak to 23 months

China Extends Gold Buying Streak to 23 Months as Imports Surge

The People’s Bank of China increased its gold reserves by approximately 23 tonnes in September, marking its 23rd month of purchases, according to data from the State Administration of Foreign Exchange cited by business.dir.bg. This expansion represents the central bank’s largest monthly purchase in nearly three years and continues its longest buying streak since at least 2015. Concurrently, Chinese households and companies are channeling funds into the precious metal as a safeguard against economic uncertainty, pushing national imports to historic highs.

During the first eight months of the year, China imported over 1,000 tonnes of gold valued at a record 158.8 billion dollars, according to customs figures reported by business.dir.bg. This figure eclipses the 886 tonnes imported during the entirety of the previous year, which was valued at 96.5 billion dollars. Aakash Doshi, head of gold strategy at State Street Investment Management, noted that consumer-purpose gold imports also reached record levels over the same eight-month span.

Diverging Central Bank Motives and Market Prices

The acceleration of official and retail purchases coincides with a downward shift in bullion prices. Gold prices declined by over 8% in September to approximately 4,176 dollars per troy ounce, retreating from a record high above 5,500 dollars reached in January. Despite this price correction, analysts point to distinct structural drivers sustaining the market.

Carsten Menke, an analyst at Julius Baer Group, stated that the primary motivation for the People’s Bank of China is political. Menke pointed to the weaponization of the U.S. dollar and Beijing’s resulting desire to reduce its reliance on U.S. Treasury securities as a reserve asset. China reduced its holdings of U.S. government debt, with the volume dropping to an 18-year low of 618 billion dollars in July, according to figures from the U.S. Department of the Treasury, as Beijing continued to diversify its foreign exchange reserves.

Complementing this official strategy, domestic retail demand thrives due to a lack of viable alternative investments. The property market, long the primary vehicle for Chinese household wealth accumulation, continues to face severe structural headwinds. Meanwhile, the CSI 300 stock index has lost about 8% of its value, and the yield on one-year Chinese government bonds has fallen to roughly 1.2%, compared to approximately 4.46% in the United States.

Ole Hansen, head of commodity strategy at Saxo Bank, observed that the opportunity cost of holding gold in China remains much lower than in many Western markets. Furthermore, Menke estimated that the Chinese central bank purchased roughly 190 tonnes of gold through the end of August this year, a figure that includes approximately 110 tonnes of unannounced acquisitions.

Price Support and Future Market Outlook

Heavy buying from China acts as a structural floor for global gold prices, counteracting pressures from rising U.S. bond yields that typically diminish the appeal of non-yielding assets. Eva Manthey, a commodities strategist at ING Bank, commented that purchases by China have become an important structural factor to support gold prices.

While Doshi projects that gold prices will rebound to a range between 4,750 and 5,500 dollars per troy ounce by the end of the first quarter of 2027, several factors could alter this trajectory. Hansen noted that a recovery of confidence in China’s domestic property market and local equities, a weaker yuan that increases local acquisition costs, or higher interest rates could dampen domestic enthusiasm for the precious metal.

Global Central Bank Momentum and Sovereign Debt Pressures

Rising levels of sovereign debt are strengthening the rationale for central banks to increase their gold reserves, as stated by Joachim Nagel, president of the German Bundesbank, during the annual conference of the London Bullion Market Association in Sorrento, Italy. In a survey of 74 central banks published by the World Gold Council in June, 45% stated that they plan to buy gold over the coming year.