Why China is importing a record amount of gold — and what it means for prices

The People's Bank of China (PBOC) has been actively purchasing gold for the last 23 months, resulting in record imports of the precious metal. This trend highlights China's strategy to reduce reliance on the U.S. dollar and reflects a growing demand for gold among Chinese households amid an uncertain economic climate.

In September, the central bank acquired approximately 23 tonnes of gold, marking its largest monthly purchase in nearly three years, as reported by the State Administration of Foreign Exchange. This streak of purchases is the longest since at least 2015. During the first eight months of 2026, China imported over 1,000 tonnes of gold, amounting to a staggering $158.8 billion, surpassing the total imports of 886 tonnes and $96.5 billion recorded in all of 2025, according to customs data.

Aakash Doshi, the head of gold strategy at State Street Investment Management, noted that consumer gold imports have reached unprecedented levels this year. He attributed the rising premiums in onshore gold prices to "stronger winter seasonal demand." Despite a decline in gold prices, which dropped over 8% in September to around $4,176 per ounce from a record high of more than $5,500 in January, demand remains robust. Doshi predicts that gold prices could rise to between $4,750 and $5,500 per troy ounce by the end of the first quarter of 2027, driven by strong consumer interest.

According to Carsten Menke, an analyst with Julius Baer Group, the PBOC's gold purchases are primarily motivated by political considerations. He pointed to the "weaponization of the U.S. dollar" and the desire to lessen dependence on U.S. Treasuries as a reserve asset. The freezing of Russian central bank assets by Western governments following its invasion of Ukraine in 2022 illustrates the risks associated with foreign-held reserves during geopolitical conflicts, whereas gold stored domestically remains secure.

China has also reduced its holdings of U.S. Treasuries, which fell to an 18-year low of $618 billion in July, as part of its strategy to diversify foreign-exchange reserves. The demand for gold is further boosted by its status as a safe haven, with consumers increasingly purchasing gold jewelry, bars, and coins due to anxiety over the fragile economy.

Investors in China are facing limited alternatives, particularly as the real estate market struggles to recover from a prolonged downturn. The CSI 300 index has declined around 8% this year, while the S&P 500 has seen a 13% increase. Returns on bank deposits and bonds have also diminished due to weak borrowing demand, with the yield on one-year government bonds in China dropping to approximately 1.2%, in stark contrast to the U.S. yield of about 4.46%.

Ole Hansen, head of commodity strategy at Saxo Bank, mentioned that the opportunity cost of holding gold in China is considerably lower than in many Western markets. This situation, coupled with the Chinese government's initiative to develop a more extensive domestic gold market, has prompted the central bank to bolster its gold inventories. Menke estimates that the PBOC has acquired around 190 tonnes of gold by the end of August, including 110 tonnes that were not officially reported.

China's increasing gold demand has provided crucial support to gold prices, helping to mitigate declines that might have occurred due to rising U.S. yields, which typically dampen interest in non-yielding assets like gold. Ewa Manthey, a commodities strategist at ING Bank, noted that central banks generally invest for the long term and are less affected by price fluctuations compared to retail investors. Menke echoed this sentiment, stating that gold prices have remained stable despite rising interest rate expectations and bond yields, particularly as the Federal Reserve signals potential rate hikes in 2026.

As of August, China held 2,387 tonnes of gold, making it the fifth-largest holder globally, although this quantity is less than one-third of the gold held by the United States. Future demand for gold could be influenced by a resurgence of confidence in China's property and equity markets, a weaker yuan that would increase local gold prices, or higher interest rates that might make bank deposits more appealing. Hansen cautioned that a significant shift in central banks' interest in diversifying reserves or a reduction in geopolitical tensions does not appear imminent.