China's decade of gold purchases as bullion keeps breaking records

Gold continues to hit records, smashing through USD 3,400 per ounce this week. Expanding on our previous exploration of central banks' bullion purchases and their role in this price run-up, we're taking a closer look at China's moves in the gold market - and the long-term correlations that tend to drive gold prices more broadly.

As our first chart shows, there have been several distinct episodes of gold accumulation by the People's Bank of China (PBOC) over the past decade.

In 2015, China disclosed significant purchases, marking an increase of about 60% in its gold reserves since 2009; subsequently, in 2016, the International Monetary Fund decided that the yuan met its criteria to be included in the Special Drawing Rights basket (an international reserve asset), marking a greater internationalization of the RMB. The IMF indicated that China's greater disclosure was a factor in this decision.

The next notable episode was 2018, when US-China trade tensions escalated in Donald Trump's first term. And as geopolitical uncertainty spiked in the wake of Russia's invasion of Ukraine, more PBOC purchases took place in 2023. Recent purchases also followed Trump's re-election, even before the US president took office and surprised markets with the extent of his tariff rhetoric.

Despite the rapid growth of China's gold reserves, they still account for only 6.5% of total official reserves in USD terms as of March 2025; that's less than half the proportion for the world as a whole (13.9%) or advanced economies (18.3%), suggesting that China still has substantial room to increase its gold holdings.

These most recent purchases align with a traditional driver for the gold price: safe-haven flows at a time of geopolitical uncertainty. There are other traditional drivers, however: notably, inflation expectations. Our subsequent charts track the price of bullion against these factors, both in aggregate and one at a time.

A traditional view of the gold market asserts that the price of bullion is negatively correlated with real interest rates in the US; i.e., negative real rates mean that inflation is more than eroding nominal yields, and this usually pushes gold higher. As a proxy, we've charted gold against the yield for Treasury Inflation-Protected Securities (TIPS).

Over the long term, a higher 10-year TIPS yield is correlated with a lower gold price; but in 2023-24, this was not the case - suggesting that central banks' gold purchases, geopolitical instability (which we have measured via the news headline-driven Policy Uncertainty Index), and speculation about "de-dollarization" were the driving factors.