Global central banks remain firmly committed to gold as a strategic reserve asset. According to data released by the People's Bank of China (PBoC), the country's gold reserves rose for the eighth consecutive month in June 2025, reaching 73.9 million ounces (approximately 2,298.55 tonnes), up by 70,000 ounces from May.

This sustained accumulation reflects broader global trends. In 2024, net gold purchases by central banks reached 1,136 tonnes—the second-highest annual total on record. In the first quarter of 2025 alone, China, Poland, and Turkey accounted for over half of global central bank gold purchases, according to the World Gold Council. Notably, 95% of surveyed central banks indicated plans to continue increasing their gold holdings in the coming 12 months, marking the highest level since the survey began in 2019.

Strategic Realignment of Reserve Assets

For many central banks, including China's, gold purchases are a strategic move to diversify reserve portfolios amid rising geopolitical and financial instability. As Zhaolian's Chief Researcher Dong Ximiao notes, gold is a non-sovereign asset that remains unaffected by unilateral sanctions and offers a hedge against volatility in fiat currencies. Amid concerns over the weakening credibility of the U.S. dollar, enhancing gold allocations helps mitigate the risks posed by currency fluctuations.

Gold accumulation also aligns with the strategic objectives of renminbi (RMB) internationalization. Speaking at the Lujiazui Forum in June, PBoC Governor Pan Gongsheng highlighted the RMB's growing global stature, noting it has become the second-largest trade financing currency and the third-most-used payment currency worldwide. According to Wu Dan of the Bank of China Research Institute, increasing gold reserves offers tangible backing to the RMB, reinforcing market confidence in China's currency amid global shifts.

While China's central bank has increased gold reserves for eight consecutive months, Wu notes that its holdings still lag behind major advanced economies, suggesting further accumulation is likely. However, Dong cautions that the pace of accumulation could be adjusted in response to policy priorities and market conditions, particularly given current high gold prices and increased volatility.

Price Impact: Not a Straight Line

Although central bank purchases provide fundamental support for gold prices, they are not guaranteed to drive sustained price increases. Wu emphasizes that central bank gold buying is a long-term policy decision rather than a signal for short-term price movements. Historical episodes show that gold prices can decline even amid strong central bank demand—as occurred between 2012 and 2016 despite robust net purchases.

Moreover, the impact of gold buying varies depending on the timing and intensity across countries. For instance, between May and October 2024, the PBoC paused gold purchases, yet domestic gold prices continued to rise. Conversely, during the same period, central banks in India and Turkey increased purchases, while international gold prices showed notable volatility.

Far East Credit Chief Macro Analyst Zhang Lin explains that central banks are typically price takers in the global gold market. For China, gold purchases are driven more by reserve structure optimization than speculative motivations. Since the end of the Bretton Woods system, gold prices have reflected changing levels of investor risk aversion, often showing volatility greater than equity markets.

Zhang attributes the post-2022 gold rally to rising geopolitical tensions, weakening dollar strength, and increased uncertainty about global economic trajectories. “Gold's valuation is essentially a mirror of perceived uncertainty,” he said.

Investment Implications: Caution Over FOMO

While central bank activity underscores gold's role as a strategic hedge, analysts caution against retail investors rushing into the market. “When the public begins chasing gold en masse, it often means that geopolitical and macro risks have already been fully priced in,” said Zhang. He warned that chasing gold at historically high levels may introduce risks that contradict gold's core role as a safe-haven asset.

For individual investors, diversified approaches—including physical gold, paper gold accounts, gold ETFs, and related equities—offer multiple access points. However, Liu Xiangdong, Chief Analyst at Dongyuan Investment, advises retail participants to focus on long-term wealth preservation, rather than attempting to profit from short-term price movements. Allocation decisions should align with personal risk tolerance, wealth levels, and life-stage considerations.

Professional investors, meanwhile, should monitor macroeconomic indicators such as U.S. real interest rates, the RMB exchange rate, and global central bank buying patterns to inform gold-related strategies. “In times of elevated equity and bond market volatility, gold remains a key portfolio hedge,” said Liu.

As Zhang succinctly puts it: “When it comes to gold, either act early—or don't act at all.”