China's Gold Buying Spree Hits 16-Month Record, Shakes Dollar

China's 16-month gold-buying streak hits 2,257 tons, challenging U.S. dollar dominance amid record gold prices.

By Athena Xu

3/7, 23:47 EST
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Key Takeaway

  • China's central bank extends its gold-buying streak to 16 months, challenging U.S. dollar dominance with total reserves reaching 72.58 million troy ounces.
  • Gold prices hit a record high of $2,161.90 amid global central banks' purchases totaling 1,037 tons in 2023 and expectations of Federal Reserve rate cuts.
  • The surge in gold demand reflects broader market dynamics and geopolitical tensions, underscoring the metal's role in global reserve diversification and investment portfolios.

China's Strategic Gold Accumulation

China's central bank has been on a gold-buying spree, consistently adding to its reserves for 16 months straight, a move that could potentially challenge the U.S. dollar's supremacy. In February alone, the People’s Bank of China increased its gold reserves by approximately 390,000 troy ounces, bringing its total to an impressive 72.58 million troy ounces, or about 2,257 tons. This strategic accumulation reflects a broader global trend among central banks to diversify reserves and reduce reliance on the U.S. dollar, aligning with the ambitions of the BRICS economic bloc to contest the dollar’s global dominance.

Record Gold Prices Amid Global Uncertainties

The price of gold hit a record high of $2,161.90 at 10:00 a.m. in New York on Thursday, marking a significant 5.25% increase over the past five days and an 18.77% increase over the past year. This rally in gold prices has been driven by a combination of central banks' purchases, totaling 1,037 tons in 2023, and traders’ expectations of Federal Reserve rate cuts. The surge is also attributed to global geopolitical tensions, including conflicts in Ukraine and Gaza, the upcoming U.S. presidential election, and uncertainties around interest rates and inflation, sparking a debate among investors about gold's role in their portfolios.

China's Unwavering Demand for Gold

Despite facing economic uncertainties, including a volatile stock market, China's demand for gold remains robust. This is evidenced by the significant increase in Swiss gold exports to China in January. Historically, gold has been seen as a safe-haven asset during times of economic turmoil or inflation. However, some analysts caution that the current high demand for gold may not be sustainable in the long term. Yet, China's consistent gold purchases underscore its commitment to diversifying its reserves and reducing its dependence on the U.S. dollar.