The People's Bank of China has been buying gold for 23 consecutive months, and the quantity of this precious metal imported by the country has set a record.

This wave of buying reflects Beijing's desire to reduce its dependence on the US dollar, as well as the lack of safe alternative assets among Chinese families. Analysts expect that demand for gold bars will continue to exist against the backdrop of an economic downturn.

According to data from the State Administration of Foreign Exchange, the People's Bank of China increased its gold holdings by about 23 tons in September, which is the largest single-month purchase volume in nearly three years and continues the longest consecutive gold buying record since at least 2015.

Chinese families and businesses are viewing gold as a safe-haven asset. Customs data shows that in the first eight months of 2026, China imported over 1,000 tons of gold, with expenditures reaching a record $158.8 billion. This figure has already surpassed the annual imports of 2025, which were $96.5 billion and 886 tons respectively.

State Street Investment Management The head of the gold strategy department, Aakash Doshi, stated that China's imports of consumer gold in the first eight months of this year have set a record. The premium for gold prices within China has soared, indicating 'stronger seasonal demand during winter,' said Doshi.

As gold prices have fallen, there has also been a continuous increase in gold holdings. In September, gold prices dropped by more than 8%, to around $4,176 per ounce; whereas in January of this year, they reached a record high of over $5,500.

Doshi predicts that by the end of the first quarter of 2027, gold prices will rise to between $4,750 and $5,500 per troy ounce, due to strong demand.

Why does China buy?

Analyst Julius Baer Group and Carsten Menke indicate that the main motivation of the People's Bank of China is political, aimed at 'the weaponization of the US dollar, as well as the resulting desire to reduce reliance on US Treasury bonds as a reserve asset.'

Western governments froze the assets of the Russian Central Bank after Russia's invasion of Ukraine in 2022, highlighting that during periods of geopolitical friction, reserves held abroad may be subject to restrictions, whereas gold stored in one's own country's vaults is not affected.

Data from the US Treasury Department shows that China has reduced its holdings of US Treasury bonds, with its holdings dropping to $618 billion in July, the lowest level in 18 years; at the same time, Beijing continues to diversify its foreign exchange reserves.

Chinese demand is also driven by the hedging properties of gold. Faced with a weak economy, Chinese consumers are purchasing large quantities of gold jewelry, gold bars, and gold coins.

Domestic investors have limited options. The real estate market, once a major means of storing family wealth, has been in a slump for several years. The benchmark CSI 300 index has fallen by about 8% this year, while the S&P 500 index has risen by 13%. With weak borrowing demand, the returns on bank deposits and bonds are also declining. The yield on China's 10-year government bonds has dropped to around 1.2%, compared to around 4.46% in the United States.

Saxo Bank, the head of commodities strategy, said: "In China, the opportunity cost of holding gold is also much lower than in many Western markets." Ole Hansen

Menke said that Beijing plans to build a deeper domestic gold market, which has also added momentum to this unprecedented buying spree and prompted them to replenish their inventories. He estimates that as of the end of August this year, the central bank has purchased about 190 tons of gold, including an undisclosed amount of 110 tons.

Gold Buffer Pad

China's demand for gold has helped to withstand the pressure that could have led to a more significant decline in gold prices, even as the yield on gold bars in the United States has risen, thereby suppressing demand for non-yielding precious metals. Under normal circumstances, when interest rates rise, gold prices tend to fall.

ING Bank Commodity Strategist Ewa Manthey stated, "Chinese buying has become an important source of support for the structural price of gold." She added that central banks' purchases are aimed at the long term and are far less sensitive to prices than retail investors.

Carsten also holds a similar view. He pointed out that despite the more obvious increase in interest rate expectations and bond yields, gold prices are still higher than they were in the summer. The Federal Reserve has indicated that there may be another interest rate hike in 2026.

Data from the World Gold Council shows that as of August, China held 2,387 tons of gold, ranking fifth in the world, but less than one-third of the amount held by the United States.

Hansen indicates that if confidence in China's real estate and stock markets is restored, demand for gold may weaken; if the RMB weakens, making gold more expensive domestically, or if interest rates rise, making deposits more attractive, that would also suppress demand.

Hansen says that greater changes will come from central banks around the world no longer being keen on diversifying their reserves, as well as a relaxation of geopolitical tensions; however, he added, "Neither of these situations seems likely to occur in the near future."