Gold prices are sliding but China goes on a relentless buying spree

Gold has taken a beating as higher US interest rates and a stronger dollar weigh on prices, but China is stepping up its purchases. The People’s Bank of China added 740,000 ounces to its reserves in September, its biggest monthly increase in three years, even as bullion fell more than 6% during the month.

Chinese households are also buying heavily, with imports exceeding 1,000 tonnes in the first eight months of 2026. The buying points to a market increasingly supported by long-term reserve diversification and demand for physical gold, even when financial conditions turn against it. The question is how much further this demand can cushion prices.

China buys into the weakness

Bloomberg reported on October 7 that China had extended its gold-buying streak to 23 consecutive months. The September addition of 740,000 ounces took official holdings to 77.47 million ounces, according to the People’s Bank of China. The monthly increase was the largest since September 2023 and exceeded the additions recorded in July and August.


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Gold shed more than 6% in September as rising energy prices linked to the Middle East conflict stoked inflation concerns and strengthened expectations of further Federal Reserve tightening. Higher yields raise the opportunity cost of holding gold, which pays no interest. A stronger dollar can also weigh on bullion by making it more expensive for buyers using other currencies.

But China increased its purchases as prices weakened. This suggests the central bank is prepared to use price dips to add to its reserves, although the latest figures do not establish that the decline itself caused the acceleration.

Beijing’s bigger calculation

The central bank’s purchases are part of a longer-running effort to diversify China’s foreign-exchange reserves. Carsten Menke, an analyst at Julius Baer, told CNBC on October 11 that the desire to reduce dependence on US Treasuries was closely linked to the weaponisation of the dollar.

The freezing of Russian central-bank assets by Western governments after Russia invaded Ukraine in 2022 showed that foreign-held reserves can become inaccessible during geopolitical disputes. Gold held within a country’s own vaults carries a different set of risks. It does not depend on another government’s promise to repay a debt.

China has also been reducing its exposure to US government debt. Its Treasury holdings fell to $618 billion in July, their lowest level in 18 years, according to US Treasury data cited by CNBC. That does not mean every dollar of Treasury sales is being redirected into gold. But the parallel movements underline Beijing’s broader effort to diversify its reserve assets.

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There is room for further accumulation. China held roughly 2,346 tonnes of gold at the end of the first half of 2026, according to figures cited by China Daily. Gold accounted for just 6.7% of its official reserves. That is below the reported median allocation among developed-market central banks, leaving scope for a gradual increase if Beijing chooses to pursue it.

Households are joining the rush

The buying story extends well beyond the central bank. China imported more than 1,000 tonnes of gold worth $158.8 billion in the first eight months of 2026, CNBC reported, citing customs data. That compares with 886 tonnes worth $96.5 billion during the whole of 2025.

These imports are not all central-bank purchases. They include gold entering the wider domestic market, where households and investors are increasingly turning to bars and coins rather than jewellery.

China Daily has reported, citing China Gold Association data, that demand for gold bars and coins rose 28.42% year on year to 339.34 tonnes in the first half. Jewellery consumption moved in the opposite direction, falling 33.88% to 132.13 tonnes. Total gold consumption reached 511.41 tonnes, up 1.23%.

The shift reflects a change in how households view gold. With property still struggling and returns on domestic deposits and bonds subdued, physical bullion is gaining appeal as a store of wealth. Ole Hansen, head of commodity strategy at Saxo Bank, told CNBC that the opportunity cost of holding gold is lower in China than in many Western markets. China’s one-year government bond yield was around 1.2%, compared with roughly 4.46% in the US, according to the same report. In comments to CNBC, Aakash Doshi, head of gold strategy at State Street Investment Management, pointed to record Chinese consumer imports and rising domestic premiums, which he said indicated stronger seasonal demand ahead of winter.

A changing market structure is cushioning gold's fall

China’s buying is part of a wider shift in the gold market. Reuters reported a week ago that Bank of Italy Deputy Governor Sergio Nicoletti Altimari and Bundesbank President Joachim Nagel continued to view gold as a strategic reserve asset despite rising bond yields. Both pointed to geopolitical instability and concerns over government debt.

Altimari said central-bank purchases by emerging economies had changed the gold market since 2022, weakening its traditional inverse relationship with real bond yields. Metals Focus expects central-bank gold demand to decline 15% this year to 720 tonnes, according to the Reuters report. Even at that level, buying would remain above pre-2022 levels.

In a World Gold Council survey published in June, among 74 central banks surveyed, 45% expected their own gold holdings to rise over the following year, the highest proportion since the survey began in 2018. Another 89% expected global central-bank gold reserves to increase.

The buying is not limited to China. Poland has also been accumulating gold, while other emerging-market central banks have been diversifying their reserves. That broader demand makes the market less dependent on Western investment funds, whose positions can change quickly when interest rates move.

The price floor for gold is not guaranteed

Gold’s resilience should not be mistaken for immunity from further losses. Gold has been slipping as a firmer dollar and rising oil prices weigh on the market. Investors were also awaiting US inflation data that could influence expectations for Federal Reserve policy.

There are limits to China’s influence. Its purchases can absorb some selling, but the central bank does not control the global gold price. Renewed confidence in Chinese property or equities could divert household savings away from bullion. Higher domestic interest rates could also make deposits more attractive.

For now, the important signal is that China continues buying while prices face macroeconomic headwinds. Its imports and household investment demand add another layer of support beyond official reserve purchases.

The immediate direction of gold will still depend heavily on US rates, the dollar and investor positioning. But the market has acquired a more durable source of demand, one that may help cushion corrections even when conventional indicators point lower.