China's gold holdings increase for 16 consecutive months, while US stocks, bonds, and the dollar face triple pressures, once again approaching warning levels?

While almost everyone is watching crude oil prices, the People’s Bank of China has continued to add over 30,000 ounces of gold in the past two months, totaling one ton of gold reserves.

What is the strategic significance of China’s central bank continuously increasing its gold holdings at this stage? Why is China passively reducing its holdings of US dollars and US Treasuries?

When US Treasuries “run high” and the central bank “hoards gold”

According to the latest news from the World Gold Council, China’s central bank continued to increase its gold reserves in February, marking the 16th consecutive month of gold reserve growth.

Data shows that by February, China’s gold reserves increased by 1 ton, reaching a total of 2,309 tons. Gold now accounts for 10% of its foreign exchange reserves, a 0.9% increase from the previous month, totaling $3.9 trillion.

China’s continuous gold accumulation signals that, amid current global chaos, gold is an important tool for central banks’ investment portfolios to hedge against uncertainties. For a country’s financial system, this is crucial.

Opposing gold is US assets, specifically US Treasuries.

Data shows that as of March 13, the yield on the 10-year US Treasury was 4.29%, and the 30-year Treasury yield was approaching 4.9%, just a step away from the 5% warning line.

For the US, the “world’s largest debtor,” higher Treasury yields mean higher borrowing costs. Investors’ confidence wavers, prompting them to sell old low-yield bonds and buy new high-yield bonds, creating a sell-off trend.

In the global bond market, 4.5% and 5% are warning thresholds and trigger points for many large investment institutions’ pre-set “stop-loss orders.” Once breached, they could trigger chain reactions of automated selling.

The surge in US Treasury yields, combined with China’s 16 months of continuous gold accumulation, clearly indicates that central banks are concerned about the “monetization of fiscal deficits” in the US and are testing the credibility of the dollar.

This is not just a simple slogan of “de-dollarization,” but a quiet strategic rebalancing of assets.

Gold, an ancient asset abandoned by the Bretton Woods system and considered “interest-free” and thus a sin by many modern financial scholars, is re-entering the core focus of central bank asset management. It is not meant to replace the dollar but to provide security amid increasing uncertainties.

From the treasures of ancient Egyptian pharaohs, to being linked to the dollar under the Bretton Woods system, and later “decoupling”—which many see as a step toward exiting history.

On the surface, it appears to be a replay of the US debt ceiling crisis, persistent US inflation exceeding expectations, and the Federal Reserve’s oscillation between “fighting inflation” and “preventing recession.”

Thanks to its status as an international reserve currency, the dollar has enjoyed the so-called “privilege of arrogance” over the past decades, easily issuing debt to respond to crises. But the debt snowball is growing larger, raising genuine concerns about its sustainability.

The surge in US Treasury yields reflects these market worries.

In addition to central banks increasing their holdings of US Treasuries, it is important to note that due to war-related factors, the international exchange rate market is also undergoing significant changes.

Market data shows that the Japanese yen, as a shadow currency of the dollar and a financing currency for US Treasuries, is again approaching 160 yen per dollar. This likely means Japan will sell US Treasuries to maintain its exchange rate and reduce costs for Japanese importers.

The yuan’s depreciation against the euro, combined with the appreciation of the dollar and yen, could trigger inflation in the US and Japan, and potentially cause a surge in US government bond yields.

If US Treasury yields continue to rise and break through critical thresholds, the pricing anchors for global assets will shake violently.

US stocks, non-US currencies, and emerging market capital flows may face a new wave of valuation pressures and capital outflows.

The Federal Reserve will find itself in a more awkward position: buying high-yield debt for the Treasury will exacerbate inflation expectations; not doing so could burst asset bubbles and trigger a recession.

For China, continuously optimizing the foreign exchange reserve structure and increasing gold holdings is a way to prepare a “safety cushion” against external extreme uncertainties. This not only enhances the credibility of RMB assets but also lays a more solid foundation for RMB internationalization.

A currency’s internationalization requires comprehensive national strength, trade networks, and sufficient, widely recognized wealth reserves as a “trust certificate.” Gold, tested over thousands of years, is one of those globally trusted “certificates.”

Every fluctuation in US Treasury yields and every change in the central bank reserve report is a footnote in the future history of this era’s financial landscape.

The wind starts from the smallest ripples; perhaps each of us should look up and see which direction the wind is blowing.