China's PBOC and the Strategic Case for Gold in a Geopolitical Era

In an era defined by geopolitical volatility and the erosion of the U.S. dollar's hegemony, the People's Bank of China (PBOC) has emerged as a pivotal actor in reshaping global reserve dynamics. By aggressively accumulating gold since November 2024, the PBOC has signaled a strategic pivot toward de-risking its sovereign currency and fortifying long-term portfolio resilience. This move is not merely a response to immediate uncertainties but a calculated step toward redefining China's role in the international monetary system.

The PBOC's Gold Accumulation: A Strategic Shift

According to a discoveryalert report, the PBOC added 70,000 troy ounces of gold in June 2025, marking its eighth consecutive month of purchases. By July 2025, its gold reserves had surged to 73.96 million ounces, with analysts estimating that the actual holdings could exceed 5,000 tonnes-far above the officially reported 2,300.4 tonnes, as reported by Money Metals. This covert accumulation reflects a deliberate effort to diversify foreign exchange reserves away from the dollar, which currently accounts for over 60% of China's reserves, according to a CSST analysis.

The PBOC's strategy is underpinned by a "price-insensitive" approach, where gold purchases continue even amid rising prices. This long-term commitment is driven by the metal's unique properties: low correlation with other assets, historical resilience during crises, and its role as a hedge against financial sanctions, as explained in a SixtyVentures analysis. As geopolitical tensions escalate-ranging from the Middle East conflict to U.S.-China trade frictions-gold's appeal as a safe-haven asset has intensified, a trend highlighted by Bloomberg.

Sovereign De-Risking: Beyond the Dollar

The PBOC's gold buildup is part of a broader de-dollarization agenda. Data from Reuters indicates that China aims to increase its gold reserves to 20% of total reserves to align with its economic weight. This shift is critical as the U.S. dollar's dominance faces challenges from rising fiscal deficits and the growing adoption of alternative currencies. By reducing exposure to a single reserve currency, China mitigates risks from potential sanctions and dollar depreciation, ensuring greater control over its monetary policy, a thesis explored by NAI500.

Gold also serves as a non-sovereign asset, insulating China's reserves from the political and economic vulnerabilities of other nations. For instance, the 2022 sanctions on Russia highlighted the fragility of dollar-based systems, prompting central banks to seek alternatives. The PBOC's gold strategy, therefore, is not just about diversification but about building a financial buffer against systemic shocks, as Equiti notes.

Global Implications: A New Reserve Paradigm

Central banks collectively added 478 tonnes of gold to their reserves in the first half of 2025, with the PBOC accounting for a significant share, according to Goldblog. This shift signals a rethinking of the post-Bretton Woods order, where nations prioritize financial sovereignty over dollar-centric systems. The PBOC has further amplified this trend by promoting the Shanghai Gold Exchange (SGE) as a hub for foreign central banks to store and trade gold, positioning China as a custodian of global reserves, as the discoveryalert report notes.

The PBOC's dual approach-combining physical gold with digital assets like stablecoins-highlights its ambition to challenge the dollar's dominance. By integrating blockchain-based solutions, China aims to create a parallel financial infrastructure that reduces reliance on Western-dominated systems, a move described by Watcher.guru. This hybrid strategy not only enhances resilience but also accelerates the internationalization of the yuan.

Future Outlook: A 10–12% Gold Target

Analysts predict the PBOC will continue its gold accumulation, aiming to reach 10–12% of total reserves within the next five years, a trajectory outlined by NAI500. This trajectory balances the need for liquidity with the imperative of long-term security. Meanwhile, the PBOC is encouraging state entities, such as insurers, to participate in gold purchases, distributing the economic impact and stabilizing market dynamics-a policy discussed earlier by SixtyVentures.

For investors, the PBOC's strategy underscores the growing importance of gold in a multipolar world. As central banks prioritize de-risking, gold's role as a store of value and geopolitical hedge will only strengthen. The yuan's gradual ascent as a reserve currency, coupled with China's gold-driven financial reforms, could redefine the global monetary landscape by the late 2020s.