The People’s Bank of China further increased its gold reserves in August. This was revealed in a report by the State Administration of Foreign Exchange (SAFE), published in early September. 60,000 ounces or 1.9 tons of gold were purchased, bringing the total gold reserves held by the Chinese central bank to 74.02 million ounces or 2,302 tons.
This marks the tenth consecutive month that the Chinese central bank has acted as a gold buyer in the market. Compared to previous purchases, the August acquisitions were as high as in July and May 2025, but significantly lower than at the beginning of the year, as the People’s Bank of China had purchased 160,000 ounces of gold in both January and February.
The purchasing strategy of recent months was thus continued, albeit not at the high pace seen at the beginning of the year. This is not self-evident, as looking back over a longer period, there have been times in recent years when the People’s Bank of China made no purchases.
Politically, China Has Little Choice but to Continue to Clearly Focus on Gold
In the summer of 2024, official statistics from the Middle Kingdom showed no gold purchases between May and October. Purchases only resumed in November and December, with significant amounts of gold being acquired again: 160,000 ounces or 4.97 tons in November, and 330,000 ounces or 10.26 tons in December.
The People’s Bank of China made very substantial gold purchases in the months following the start of the war in Ukraine. Alarmed by Western sanctions against Russia, the central bank’s leadership began selling US Treasury bonds and, in return, bringing gold into the country as currency reserves. Since then, a large portion of maturing US Treasury bonds has no longer been converted into new US bonds; instead, the freed-up funds are preferably invested in gold.
Such a reaction is understandable, as the communist leadership in Beijing is well aware that China’s US dollar holdings would also be sanctioned by the West should the Taiwan issue escalate one day. From the experiences Russia had with its Western foreign exchange reserves, China immediately drew the conclusion that gold held domestically is by far the better reserve, as it cannot be attacked by the West.
Western Sanctions against Russia Were a Serious Warning for China
Just a few months after the start of the Russian attack on Ukraine at the end of February 2022, the Chinese central bank’s gold purchases noticeably increased. Official statistics therefore recorded very high gold acquisitions for November and December 2022: 1,030,000 ounces or 32.03 tons in November, and 970,000 ounces or 30.17 tons in December.
In the following year, 2023, Chinese gold purchases continued with high intensity. In total, the central bank added 7,230,000 ounces or 225.98 tons of gold to its reserves between January and December 2023. The weakest acquisition occurred in April with 8.08 tons, while the most gold was purchased in August with 28.93 tons.
Meanwhile, the sharp rise in the price of gold has also significantly increased the value of China’s foreign exchange reserves. It increased by $41 billion from July to August 2025, reaching $3.64315 trillion. This represents an increase of 1.1 percent. Chinese state gold contributes $253.84 billion to this total. That is $9.86 billion, or four percent more than in July.
The People’s Bank of China Still Has a Long Way to Go
The gold share of China’s foreign exchange reserves has thus risen from 5.2 percent last year to currently 6.9 percent. This quite remarkable increase stems from two directions. On the one hand, gold is actively purchased, and on the other hand, the value of US Treasury bonds held by China is decreasing. Five years ago, China held US bonds worth approximately $1.1 trillion. Currently, it is only $756.4 billion.
The long-term trend of moving out of the US dollar and into gold will thus continue in 2025, even if the latest report from the US Treasury Department indicates an increase in US Treasury securities held by China by $100 million to $756.4 billion. More decisive than short-term monthly fluctuations, however, are the long-term trends, and these continue to clearly favor gold over the US dollar for China.
Despite the impressive acquisitions in the last three years, the gold share of the People’s Bank of China, at just 6.9 percent, is still remarkably low in international comparison. The USA holds 100 percent of its reserves in gold, and for most Western central banks, the gold share of total reserves is over 70 percent.
If China also wants to reach this level, this trend must continue at a high pace for several more years. As other central banks from emerging and developing countries are also currently making massive gold purchases, it can be assumed that the demand for gold from central banks will remain very high in the coming years.
