China Ramps Up Gold Reserves in Strategy to Cut Reliance on US Assets

The People's Bank of China (PBOC) bought gold on a net basis for a 23rd consecutive month in September, notching its largest purchase in nearly three years, according to the World Gold Council (WGC). Analysts see the move as part of a long-term effort to diversify the risks attached to its huge foreign exchange reserves, which are heavily concentrated in US dollar-denominated assets.

According to the WGC, China's central bank added about 23 tonnes of gold in September, bringing reported reserves to roughly 2,410 tonnes — the largest net purchase since October 2023. Gold accounted for 8.5% of China's total official reserves at the end of September, up from 5.5% at the end of 2024.

Foreign exchange reserves are assets held by central banks to ensure international payment capacity and to cushion financial shocks. They typically include foreign currencies, foreign government debt and gold.

Demand is not limited to the central bank. The China Gold Association said purchases of gold bars and coins in the first half of 2026 were 28.4% higher than a year earlier, with buying continuing even as prices fell about 8.5% during the month.

The WGC attributed part of the price decline to a stronger US dollar and rising US Treasury yields. When interest rates are pushed up to curb inflation, those investments become more attractive to private investors because they pay interest, while gold does not.

Why is China buying more gold?

According to Thu Lan Nguyen, head of commodity research at Commerzbank in Frankfurt, the main goal is to reduce dependence on US government debt, also known as Treasuries.

China holds a large stock of dollar-denominated assets, so buying gold helps it limit its exposure to decisions made in Washington. "China's gold purchases are part of a broader effort to make its reserves more resilient," Nguyen told Al Jazeera.

The freezing of roughly $300 billion of the Russian central bank's overseas assets by Western countries after Moscow's 2022 invasion of Ukraine showed how quickly reserves held abroad can become inaccessible.

China's concern may be that a future confrontation with Washington would expose part of its overseas assets to similar restrictions. "Gold held domestically has an important advantage in this respect: it does not represent a claim on another country and is therefore less exposed to sanctions or asset freezes," Nguyen said.

"I would interpret this primarily as a risk-management measure," she added, citing rising geopolitical tensions together with economic and fiscal risks.

Growing US debt, which topped $40 trillion for the first time in history earlier this year, adds to the uncertainty. In February, the US Congressional Budget Office projected that federal debt held by the public would rise from 101% of US economic output in 2026 to 120% by 2036. That feeds concerns about Washington's ability to repay in a future economic crisis. China holds a substantial share of that debt. Gold is therefore seen as a less volatile and lower-risk asset to hold.

Chinese households have different motives for buying gold. When confidence in other investment channels weakens, gold can become more appealing as a way to store savings. "Strong gold demand may partly reflect a search for alternative stores of value," Nguyen said.

The WGC identified weakness in China's stock market as a factor supporting domestic gold demand, while the property market is weighed down by heavy borrowing and overbuilding, contributing to falling home prices and making it a less attractive investment channel.

What does this mean for the dollar?

Analysts caution that China's heavier gold buying does not signal an imminent end to the dollar's global dominance. "I would be careful about describing this as a major shift away from the US dollar," Nguyen said. "The dollar is still by far the dominant global reserve currency."

Even so, a gradual shift could still matter if China and other central banks allocate more of their new reserves to gold, buying fewer US assets than usual. That could erode one source of demand for US government debt. But the impact would depend on how widely and how quickly the shift spreads.

"The key point is that this is likely to be a slow diversification process rather than a sudden abandonment of the dollar," Nguyen said. She added that the consequences for the US economy would remain limited unless the trend broadens and accelerates significantly.

Central banks also need readily available foreign currency to support international payments, and the dollar remains central to those transactions. Gold can therefore provide financial protection, but it cannot directly replace every function of dollar reserves.

Who else is buying gold?

China is part of a broader trend, especially among central banks in emerging economies, according to Nguyen.

"This trend is particularly pronounced among emerging-market central banks," Nguyen said. "But sanctions are only part of the story."

Poland has also become a more prominent buyer. Its central bank bought 31 tonnes in the first quarter of 2026 and a further 8 tonnes in July, according to the WGC.

Large reserves do not necessarily reflect recent buying. India, for example, confirmed in June that its physical gold holdings were unchanged at about 880.5 tonnes. India's gold reserves have changed very little since mid-2025, according to the WGC. The country bought about 4 tonnes in 2025, down from 73 tonnes in 2024.

Despite China's sustained buying, its reserves remain far smaller than those of the United States. Its roughly 2,300 tonnes at the end of 2025 amounted to less than a third of the US stockpile of about 8,133 tonnes.