China's central bank has been on a gold-buying spree for 23 consecutive months, with September marking its largest purchase in nearly three years at about 23 tonnes. This trend is part of Beijing's effort to decrease dependence on the U.S. dollar, especially following geopolitical tensions that have highlighted the risks of holding U.S. Treasuries.
In the first eight months of 2026, China imported over 1,000 tonnes of gold, spending a record $158.8 billion, surpassing the total imports for all of 2025. Analysts like Aakash Doshi from State Street Investment Management note that consumer demand for gold is at an all-time high, driven by economic instability and a lack of safe investment alternatives.
The price of gold has recently fallen to around $4,176 per ounce, down over 8% in September, but is expected to rebound to between $4,750 and $5,500 by early 2027 due to strong demand. The People's Bank of China's strategy is politically motivated, as highlighted by Carsten Menke from Julius Baer Group, who points out the desire to avoid the risks associated with foreign-held reserves.
Additionally, domestic investors are increasingly turning to gold as the real estate market struggles and bond yields remain low. This significant demand from China is providing structural support for gold prices, which typically decline when interest rates rise. However, potential shifts in investor confidence or changes in interest rates could impact future demand for gold