China's central bank has been on a record-breaking gold-buying spree, purchasing the precious metal for 23 consecutive months. The country's gold imports surged to a record $158.8 billion in the first eight months of 2026, exceeding the $96.5 billion imported in all of 2025. The People's Bank of China (PBOC) added about 23 tonnes in September, marking its largest monthly purchase in nearly three years. Analysts attribute this surge to Beijing's efforts to reduce its reliance on the U.S. dollar and the lack of safe investment alternatives for Chinese households.
The PBOC's primary motivation is political, aiming to diversify its foreign-exchange reserves and reduce dependence on U.S. Treasuries. Carsten Menke, an analyst at Julius Baer Group, noted the 'weaponization of the U.S. dollar' as a key driver. Western governments freezing Russia's central bank assets in 2022 highlighted the risks of holding foreign reserves, making gold a more secure option. Chinese households and companies are also turning to gold as a safe haven amid economic uncertainty and a struggling real estate market.
Despite gold prices falling more than 8% in September to around $4,176 an ounce, analysts like Aakash Doshi at State Street Investment Management predict prices to rise to $4,750 to $5,500 per troy ounce by the end of the first quarter of 2027. The robust demand from China has provided structural support for gold prices, helping them withstand pressures from rising U.S. yields. Ewa Manthey, commodities strategist at ING Bank, emphasized that central banks buy gold for the long term, making them less sensitive to price fluctuations than retail investors.
However, potential shifts in demand could occur if China's property and equities markets regain confidence or if the yuan weakens, making gold more expensive domestically. Ole Hansen, head of commodity strategy at Saxo Bank, noted that higher interest rates could also make bank deposits more attractive. The broader shift would depend on central banks losing interest in diversifying reserves and geopolitical tensions easing, neither of which appears imminent.