China highly increased its gold purchases this year. Over the
first eight months, the country imported more than 1,000 tonnes of
the precious metal, spending a record 158.8 billion dollars on it.
For comparison, in all of 2025 China imported 886 tonnes of gold
for a total of 96.5 billion dollars.
The main reason behind this demand is the desire of both the
state and private investors to protect their savings against the
backdrop of geopolitical instability and the weak returns of other
assets. According to the Financial Times, Chinese holdings of US
Treasury bonds fell in July to 618 billion dollars, the lowest
level since August 2008. At the same time, attractive investment
options inside the country have shrunk. The property market crisis
has continued since 2021, the CSI 300 index has lost 1.8% since the
start of the year and stands more than a fifth below its early 2021
peak, while the yield on Chinese government bonds has also
approached historic lows.
Meanwhile, the real volumes of the People’s Bank of China’s
purchases may be higher than the official figures. Goldman Sachs
estimates the central bank’s July buying at 35 tonnes, against the
20 tonnes officially declared. China, in turn, is the world’s
largest producer of gold, yet its domestic output is clearly not
enough for current demand. Last year the country mined 384 tonnes
of gold.
The Chinese domestic market keeps gold prices slightly above
global levels, which stimulates further imports. According to
Jinrui Futures analyst Zijie Wu, an additional factor has been the
strengthening of the yuan and shifts in world gold prices. A strong
national currency creates more favorable conditions for purchases
abroad. Against this backdrop, Chinese exchange-traded funds are
also increasing their gold holdings. In August its gold reserves
rose by 650,000 ounces, the largest monthly addition since 2023.
The central bank has been steadily increasing its gold reserves for
almost two years, Bloomberg writes.
It is no coincidence that last year China opened its first
offshore vault for state gold reserves, on the territory of Hong
Kong. Before that, it usually kept its gold only in the vaults of
the People’s Bank of China. The offshore vault will allow China to
trade gold for yuan and for the national currencies of other
countries, outside the dollar system. World Gold Council estimates
show that China’s official gold reserves stood at around 2,366
tonnes in early September, accounting for about 8% of the global
total and placing the country sixth worldwide.
China’s growing gold purchases have begun to influence prices
worldwide, with the impact extending beyond the sheer scale of its
demand. It is important to understand here that this is not only
about volumes. China’s behavior is changing the psychology of the
market. When investors around the world see that both the central
bank and private savers of an enormous economy are systematically,
month after month, shifting into gold, it works as a signal. If
Beijing is moving into an asset that carries no counterparty risk,
then it is seriously preparing for turbulence. And that signal is
picked up by others. Behind Chinese demand come funds, banks, and
private buyers in the rest of the world, while talk of gold being
undervalued grows ever louder.
In the end, a curious closed loop emerges. Geopolitical
instability drives China into gold, Chinese purchases push the
price up, the rising price attracts new buyers around the world,
and the general frenzy only deepens the very anxiety that set the
whole process in motion.
In a commentary to AzerNEWS, economist Natiq
Mammadov said China’s surge in gold purchases should be viewed
primarily as a long-term diversification strategy rather than
simply a temporary reaction to geopolitical tensions.
He noted that while geopolitical uncertainty has certainly
accelerated the process, China has been increasing its gold
reserves for an extended period. According to Mammadov, the
continued accumulation of gold by the People’s Bank of China
suggests that the authorities are focused on long-term reserve
diversification rather than short-term speculation.
At the same time, Mammadov stressed the importance of
distinguishing between government purchases and China’s total gold
imports. He pointed out that overall imports also reflect strong
demand from households, institutional investors and the financial
sector.
“For private investors, gold provides an alternative at a time
when the property market has been under pressure and returns on
some traditional domestic assets have been relatively
unattractive,” he said, adding that it represents a structural
shift that has been reinforced by geopolitical uncertainty.
Mammadov noted that further growth in Chinese demand could
provide significant support for global gold prices, particularly if
it continues alongside purchases by other central banks. However,
he stressed that China alone cannot determine the global price of
gold, as interest rates, the US dollar, investment flows and global
economic conditions will also remain important factors.
The expert highlighted what he considers to be the more
important issue: the changing role of gold in the international
financial system. He said China’s reduction of its holdings of US
Treasury securities does not mean that gold is simply replacing the
dollar. Rather, he explained, it indicates a broader effort to
diversify reserve assets and reduce dependence on any single type
of asset.
In the long term, Mammadov said, gold could become increasingly
important as a neutral strategic reserve asset alongside the
dollar, the euro and other currencies. If China and other central
banks continue accumulating gold while reducing their dependence on
dollar-denominated assets, the strategic importance of gold in the
international financial system is likely to increase.
Overall, Mammadov described China’s current gold purchases as
part of a long-term restructuring of reserves, accelerated by
geopolitical uncertainty. He added that the immediate effect may be
stronger support for gold prices, while the deeper significance is
that gold is gradually returning to a more prominent role as a
strategic reserve asset in an increasingly diversified
international monetary system.