How China’s Gold Rush Could Impact the Global Gold Market


Published: March 11, 2023

Gold bullion on pile gold coins at trading chart background

As investors and gold buyers look for ways to protect their wealth, the news that China’s central bank is continuing to increase its gold reserves should be of interest. The Chinese government has been quietly buying more gold over the last several months, which has caused a ripple effect on global supply levels and spot prices worldwide.

If your interest is peaked and you want to know if China buying tons of gold should be cause for concern or if investments will benefit from this recent stockpile, keep reading.

China’s Reported Gold Reserves Rise For The First Time Since 2019

China’s reported gold reserves have risen for the first time since 2023. This is a significant development marking China’s first purchase of gold in three years.

China’s Gold Reserve History

The Chinese government started accumulating large amounts of gold during Mao Zedong’s rule in 1949. At that time, only about 200 metric tons were stored by the Bank of China.

However, this number grew slowly until 2002, when Beijing decided to increase its holdings to diversify its foreign exchange reserves away from U.S. dollars and other currencies.

The Current State Of China’s Gold Reserves

The World Gold Council (WGC) recently revealed that central banks globally bought 399 tonnes of gold in the third quarter of 2022 – an amount far higher than ever before recorded within a single three-month period – fuelling speculation that countries like China or Russia may be stockpiling large amounts without publicly reporting these purchases.

According to data released by the People’s Bank of China, China’s reported gold reserves rose for the first time since 2019. The bank said it had added 32 tonnes of gold worth around $1.8 billion to its reserves in November, bringing its total holdings at the end of that month to 1,980 tonnes with a value of around $112 billion.

As of 2023, China held nearly 2,000 metric tons (MT) of gold – more than double what it held just ten years prior. This increase is significant as China now has the world’s sixth-largest official national gold reserves after countries including Russia, Germany, and the United States.

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Speculation As To Why China’s Increasing Its Gold Supply

Analysts are attempting to ascertain the reasons for China’s current increase in gold supply and have come up with a few possibilities.

A Way To Stray From A Growing Reliance On The U.S. Dollar

China has long relied on the U.S. dollar as its primary reserve currency, growing over time to where Chinese central bank reserves mainly consist of the U.S. dollar. However, this dependence could be at risk due to increasing tensions between China and the United States.

The potential for U.S. government sanctions against Chinese central bank reserves is a real concern for Beijing. They are potentially looking to diversify their holdings away from solely relying on the greenback.

This could help protect their economy from future economic disruptions or currency devaluations caused by global events such as a trade war or pandemic. Gold bullion is an attractive option due to its relative ease of conversion into other currencies through traditional means or underground networks if needed. Chinese investors might be looking at precious metals like gold to protect their wealth during uncertain times.

A New Currency May Be On The Horizon

Another theory suggests that China may be preparing for a new global currency backed by gold. This would allow them more control over their own monetary policy, making it easier for them to conduct international transactions without relying on foreign currencies like the U.S. dollar or Euro.

There has been some speculation that Russia and China are working together to create this new currency. However, there hasn’t been official confirmation from either government yet.

The Impact On The Global Gold Supply

The increase in demand for gold due to China’s increased gold reserves has significantly impacted the global gold supply. As more investors and buyers turn to precious metals as an investment, the available supply of gold worldwide is decreasing. This decrease in available supply has caused a rise in spot prices of gold around the world, creating both opportunities and challenges for investors and buyers alike.

Gold’s Supply And Demand

As China increases its holdings of physical gold, it creates an increased demand from other countries looking to purchase or invest in precious metals. As demand rises, so does buyers’ competition, leading to decreased supplies of physical gold bars, coins, and bullion worldwide.

The limited availability makes it difficult for some people to find what they need when they need it without paying exorbitant premiums over spot price or waiting long periods until new shipments arrive from refineries or mints overseas.

What This Means For Gold’s Spot Price

When there’s tension between supply and demand markets, investors can usually expect prices to drive up. Investors often view gold as a safe-haven asset during economic instability, so increased buying from China could cause spot prices to rise across all markets worldwide, including those based in the United States.

The effect that this increase in demand has had on spot prices is evident across all markets where precious metals are traded, including commodities exchanges like COMEX (Commodity Exchange) and OTC (Over-the-Counter). Prices have been steadily rising since China began increasing its holdings, which means that investors must be prepared to pay higher premiums if they want access to these assets now rather than later when market conditions may change again.

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Impact on American Investors and Buyers

China’s increased gold reserves have significantly impacted American investors and buyers. The increase in demand for gold has caused the spot price of gold to rise, increasing the value of owned precious metals. This is great news for those who already own physical bars, coins, or bullion, as they can sell them at a higher price than before.

Additionally, this surge in demand has created more opportunities to invest in precious metals. With the rising prices of gold and other precious metals such as silver, platinum, and palladium, there are now more attractive investment options available to American investors looking to diversify their portfolios with tangible assets like these.

Higher demand from central banks should help support global gold demand and prices, which currently hover around $1,775 per ounce.

Investing In Precious Metals To Get Ahead Of Rising Gold Prices

Investing in gold through physical bars, coins, or bullion can help protect your portfolio from potential losses associated with volatile stock markets while providing potential upside if gold prices continue upward over time.

Precious metal investing can be wise for those looking to diversify their portfolios and protect their wealth. Investors should consider three main strategies: purchasing physical bullion, ETFs and stocks, or investing in precious metals IRAs.

Physical Bars, Coins, and Bullion

Buying physical gold is the most direct way of investing in gold. Physical bars, coins, and bullion can be purchased from various dealers at varying prices depending on the metal’s purity. The benefit of buying physical gold is that it allows investors to store it themselves or with a third-party provider for safekeeping.

However, some risks are associated with buying physical gold, such as theft or loss due to natural disasters like floods or fires. To mitigate these risks, investors should research reputable dealers before purchasing and always insure their investments against theft or damage.

Gold ETFs & Stocks

Exchange Traded Funds (ETFs) are another way to gain exposure to the market without having to purchase large amounts all at once. They allow investors to purchase shares in a fund that tracks the price of gold on the stock market.

This allows you to access the market without having to buy large amounts all at once, which would otherwise be cost-prohibitive for many people looking to get started with investing in precious metals like gold. ETFs are an attractive choice for those who want to start investing in precious metals, such as gold but have budget constraints.

Precious Metals IRA

Investing in a precious metals IRA offers tax advantages that other investment options don’t. Not only can you reduce your taxable income when you invest in your IRA, but you also will not pay taxes on any of your profits while your account matures. You are only taxed when you take money from the IRA at retirement.

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Invest In A Precious Metals IRA Today

Investing in physical gold bars, gold coins, and gold bullion within a precious metals IRA is a great way to diversify your portfolio while also getting additional tax advantages. It’s also a great way to hedge against inflation, depression, and economic uncertainty.

If you’d like to learn more about saving for retirement with a gold and silver IRA, our team is standing by to answer any questions you have. Give us a call and open your account today.