China's end-August forex reserves at 3.322 trillion; estimated at 3.317 trillion

China's end-August forex reserves at 3.322 trillion; estimated at 3.317 trillion

China's aggressive gold-buying spree continues to make headlines, with the People's Bank of China (PBOC) purchasing significant amounts of gold in recent years. The latest figures indicate that China's foreign exchange reserves stood at $3.322 trillion as of end-August 2025, with estimates slightly lower at $3.317 trillion [1].

The surge in gold prices, reaching a record high of $3,508.5 per troy ounce in 2023, coincides with China's strategic efforts to diversify its foreign currency reserves away from the U.S. dollar. This trend is part of a broader movement among developing economies seeking to reduce their reliance on the dollar, a move accelerated by Western sanctions that froze $300 billion of Russia's official reserves in 2022 [1].

China's gold purchases have been substantial, with the PBOC buying 21 metric tons of gold so far in 2025, adding to its 2024 total of 44 tons and the 2023 figure of 225 tons. These purchases have positioned China as the world's largest gold buyer among central banks. If China were to target 5,000 tons, as suggested by Hou Huimin in 2009, it would become the second-largest official holder of gold globally, behind the United States [1].

Gold is seen as a relatively low-risk asset, often used as a hedge against inflation and geopolitical or economic uncertainty. Central banks typically reduce gold purchases when prices are high. However, the current systemic uncertainty, highlighted by U.S. President Donald Trump's policies and criticism of the Federal Reserve, has led to increased demand for gold as a safe haven asset [1].

The ongoing uncertainty in global markets underscores the strategic importance of gold in China's foreign exchange reserves. As China continues to diversify and de-dollarize its reserves, gold remains a crucial component of its strategy to manage risk and maintain economic stability.

References:
[1] Polina Devitt and Kevin Yao. (2025). Analysis: Is much gold enough to diversify? Reuters. Retrieved from https://ca.finance.yahoo.com/news/analysis-much-gold-enough-diversify-135841484.html