context: The PRC raised its gold holdings to 74.02 million fine troy ounces by August 2025, marking the tenth consecutive month of increases. Aside from financial and market rationale, the move is also promoted by longer-term strategic considerations, not least diversifying reserve assets to hedge against dollar risks and promoting RMB internationalisation.
Hu Zaiyong 胡再勇 China Foreign Affairs University Global Economic Governance Quantitative Research Innovation Platform director shared his insights on the reasons behind the PRC increasing gold reserves
- long-term perspective on accumulation
- since PBoC (People's Bank of China) began disclosing gold holdings in 2016, only three years (2017, 2020, 2021) saw no increase
- rationale for increasing hold reserves
- need for diversification of reserve assets
- gold exhibits low or negative correlation with other asset classes
- inclusion of gold improves risk-return efficiency of the overall reserve portfolio
- declining USD value is weakening its dominance as the global reserve currency
- increasing gold reserves helps optimise the structure of PRC official assets
- most countries in Europe, Russia and India are also recently including gold in their official reserves
- gold exhibits low or negative correlation with other asset classes
- need for preservation and appreciation of reserve assets
- gold returns show positive skew and high intrinsic value
- historically, gold prices have trended upward generally despite fluctuations
- expectations of rising gold prices
- PBoC's recent purchases occurred during uptrending price periods
- reflects anticipation of continued price increases driven by intensifying geopolitical and trade frictions
- accumulation aligns with market expectations and strategic considerations
- PBoC's recent purchases occurred during uptrending price periods
- support for external debt repayment and currency stability
- gold, like foreign exchange and SDRs (special drawing rights), can be used for international payments and debt servicing
- larger gold holdings enhance sovereign debt repayment capacity
- strong reserves boost confidence in the PBoC's ability to maintain currency stability
- deters speculative attacks on the RMB
- provides leverage to intervene in foreign exchange markets when needed
- supports borrowing and financing in both domestic and foreign currencies
- critical for RMB internationalisation, which is entering a key junction right now
- it requires tangible backing and policy credibility
- symbol of national strength and strategic security
- gold is a measure of economic power
- major global economies hold substantial gold, yet the PRC's holdings remain below levels commensurate with its economic size compared to the US and EU
- gold is a core component of national strategic reserves
- gold enhances liquidity in emergencies and serves as widely accepted collateral
- amid increased global uncertainty, especially highly volatile Trump 2.0 foreign policies, the PRC needs to strengthen gold reserves to safeguard economic and financial security
- gold is a measure of economic power
- need for diversification of reserve assets