Holding gold for 14 consecutive months, what move is the Chinese central bank making?

China’s central bank announced the latest data: by the end of December, gold reserves reached 74.15 million ounces (approximately 2,306.323 tons), an increase of 30,000 ounces (about 0.93 tons) month-over-month, marking the 14th consecutive month of accumulation. Meanwhile, foreign exchange reserves also increased by $11.497 billion to $3,357.869 billion. Against the backdrop of widespread optimism among global central banks towards gold and record-high international gold prices, the continuous accumulation by China’s central bank reflects deep strategic considerations.

Scale and Pace of Central Bank Gold Accumulation

According to the latest news, China’s central bank’s gold reserve buildup has formed a stable rhythm. From 14 consecutive months of increases, this is not a temporary move but part of a long-term strategy.

Data comparison perspective

Although this increase appears steady, its significance becomes clear in the context of the global central bank gold-buying frenzy. According to relevant information, the net global central bank gold purchases in 2025 already exceeded 1,000 tons. China’s ongoing accumulation is an important part of this worldwide wave of central bank gold buying.

Strategic Logic Behind Central Bank Gold Accumulation

Why does China’s central bank keep increasing its gold reserves? Several key considerations underpin this:

Foreign Exchange Reserve Structure Optimization

Gold, as a final means of payment and risk hedging tool, plays a unique role in the global financial system. Compared to other foreign exchange assets, gold is unaffected by any country’s credit risk and is a true “hard currency.” Amid rising geopolitical risks and increasing global economic uncertainties, optimizing the proportion of gold in foreign exchange reserves can better prepare for potential financial risks.

Following Global Central Bank Trends

China’s central bank’s accumulation is not an isolated act. Other central banks worldwide are also significantly buying gold, reflecting a consensus among global financial institutions on gold’s value. When most central banks are increasing their holdings, China’s synchronized actions serve both risk prevention and maintaining the international competitiveness of its foreign exchange reserves.

Supporting RMB Internationalization

Ample gold reserves are crucial for supporting a currency’s international status. Greater gold reserves can boost market confidence in the stability of the RMB, providing long-term support for the internationalization of the RMB.

Multiple Drivers Behind Gold Price Rise

China’s central bank’s decision to continue accumulating gold during this period is closely related to the strong performance of international gold prices.

Core Factors Driving Gold Price Increase

• Geopolitical Risks: Global uncertainties boost safe-haven demand, with gold as a safe asset attracting capital inflows.
• Interest Rate Cut Expectations: The Fed is expected to cut interest rates by a total of 75 basis points in 2025, reducing the holding costs of gold; market expectations for continued rate cuts in 2026 provide long-term support for gold prices.
• Central Bank Gold Buying Boom: Global central banks purchased over 1,000 tons of gold in 2025, providing strong support for gold prices through large-scale and stable buying.
• Dollar Credit Concerns: Events like Switzerland freezing related assets have raised doubts about the paper currency system, increasing demand for gold as a “hard currency.”

According to data, international gold prices in 2025 saw a maximum annual increase of over 75%, hitting 50 record highs within the year, approaching $4,600 per ounce at year-end. This extraordinary bull market, rarely seen in over a decade, is a significant backdrop for central bank accumulation.

Outlook for 2026

Looking ahead to 2026, the gold market still has multiple supporting factors:

Policy Support

China’s central bank has clearly outlined its key work directions for 2026: intensify counter-cyclical and cross-cyclical adjustments, and flexibly and efficiently use monetary policy tools such as reserve ratio cuts and interest rate reductions. This means liquidity management will become more flexible, and expectations for rate cuts remain, providing support for gold prices.

Institutional Forecasts

Goldman Sachs has raised its target price for gold to $4,900 per ounce by the end of 2026, with some institutions projecting up to $5,500. These forecasts are based on the continued gold purchases by global central banks, persistent geopolitical risks, and the prolongation of rate-cut cycles.

Possible Risks

It should be noted that if the Fed’s rate cuts fall short of expectations or profit-taking triggers a sell-off, technical corrections may occur. However, in the medium to long term, the trend of central bank gold purchases and gold’s strategic reserve status will not change.

Summary

China’s central bank’s 14-month consecutive gold accumulation reflects a well-considered long-term strategy. It is not only an optimization of foreign exchange reserve structure but also an active response to changes in the global financial landscape. Against the rising geopolitical risks and increasing global economic uncertainties, gold’s role as a final means of payment and risk hedge is being re-recognized. The central bank’s actions are in harmony with the global wave of gold buying, jointly supporting the long-term upward trend of gold. For market participants, this indicates a consensus among major financial institutions on the long-term value of gold and highlights its importance in asset allocation.