Central Bank Extends Gold Buying Streak to 15 Straight Months, Sending a Strong Market Signal

By Tang Jing, 21st Century Business Herald

On February 7, new figures released by China’s State Administration of Foreign Exchange (SAFE) showed that as of the end of January 2026, China’s foreign exchange reserves stood at US$3.3991 trillion. This marks an increase of US$41.2 billion compared with the end of December 2025, representing a 1.23% month-on-month rise.

Notably, this is the sixth consecutive month that China’s reserves have remained above US$3.3 trillion, extending the uptrend and reaching the highest level since December 2015.

SAFE attributed the increase to a combination of global market dynamics in January. Influenced by fiscal and monetary policy developments—and shifting expectations—in major economies, the U.S. dollar index declined, while prices of major global financial assets generally moved higher. Together, exchange-rate translation effects and changes in asset valuations lifted the headline reserve figure.

SAFE also emphasized that China’s economy has continued to improve steadily, with resilience becoming more evident. This underlying stability, the regulator noted, provides solid support for keeping the overall reserve level broadly stable over time.

Positive valuation effects continue to push reserves higher

Guan Tao, Chief Global Economist at BOC Securities, explained that the rise largely reflects a positive valuation effect driven by currency translation and asset price movements. In January, as major-economy monetary policy expectations and macro data evolved, the dollar’s path became more volatile. However, it ultimately weakened for the third straight month, declining 1.4% to 97.0. Over the same period, global financial asset prices were broadly higher—adding to the upward pressure on reserves when measured in U.S. dollars.

Financial markets have long observed a clear pattern: when the U.S. dollar index pulls back meaningfully, many countries tend to report higher foreign exchange reserves, as the U.S.-dollar value of non-dollar assets increases through translation.

Wen Bin, Chief Economist and President of the Research Institute at China Minsheng Bank, told reporters that asset price changes and exchange-rate swings remained the primary drivers behind the month’s reserve movements.

He noted that the dollar’s weakness in January was shaped by multiple forces. Rising geopolitical risks—driven by developments across several regions—added to uncertainty and weighed on dollar sentiment. At the same time, market expectations around U.S. policy direction contributed to increased volatility, alongside shifting interest-rate pricing and movements in U.S. Treasury yields.

From a currency perspective, the U.S. dollar index fell 1.4% to 97.0, at one point dropping to around 95, near a four-year low. Major non-dollar currencies strengthened in tandem: the Japanese yen, euro, and British pound rose 1.23%, 0.9%, and 1.6% against the dollar, respectively.

Asset markets also reflected a generally supportive valuation backdrop. The yield on the 10-year U.S. Treasury rose 8 basis points to 4.26%. Global equities were resilient overall, with the S&P 500 up 1.4%, the Euro Stoxx index up 3.4%, and Japan’s Nikkei up 5.9% over the month.

Trade resilience and balanced cross-border flows underpin stability

Wen added that China’s external sector continues to demonstrate strong momentum. In 2025, exports reached a record high, while the share of shipments tied to sectors such as new energy and high-end equipment steadily increased. China’s international market footprint also became more diversified and balanced.

On cross-border capital flows, overseas investors’ willingness to hold RMB assets for the long term has continued to strengthen. Securities investment maintained net inflows at a reasonable scale, while foreign direct investment remained broadly stable. With ongoing policy efforts to improve cross-border investment and financing convenience, China’s capital markets are expected to remain attractive to global investors.

Wang Qing noted that under various measurement standards, China’s current reserve level—slightly above US$3 trillion—remains appropriately ample. Looking ahead, he expects reserves to stay broadly stable. Against a more volatile external environment, a sufficiently strong reserve buffer supports the RMB exchange rate in remaining within a reasonable and balanced range, while also serving as a key safeguard against potential external shocks.

Pang Ming, Specially Appointed Senior Research Fellow at the National Institution for Finance & Development, said the continued rise in reserves reflects both valuation gains and an encouraging signal that China’s cross-border payments have remained largely balanced. He also pointed to relatively moderate demand for foreign currency purchases among corporates and households, alongside a stabilizing market outlook for the RMB exchange rate.

In January, amid heightened dollar volatility, the RMB maintained a gradual, modest appreciation trend. Guan Tao observed that after both onshore and offshore spot rates moved through 7.0 late last year, the RMB central parity rate strengthened further, breaking below 7.0 on January 23—the first time since May 19, 2023. Over the month, the central parity rate and the onshore spot rate (the 4:30 p.m. interbank closing price) appreciated by 601 and 404 basis points, reaching 6.9678 and 6.9486 per U.S. dollar, respectively.

Guan added that onshore spot rates remained on the stronger side relative to the fixing, while offshore rates were generally stronger than onshore rates. However, the month’s average deviations among the “three prices” did not move in a single direction—suggesting expectations stayed broadly stable, without a buildup of overly strong one-way appreciation sentiment.

Gold reserves rise for the 15th straight month

Gold reserves were another key highlight. Data released the same day showed that as of the end of January 2026, China’s gold reserves stood at 74.19 million ounces, up from 74.15 million ounces at the end of December 2025. This represents a month-on-month increase of 40,000 ounces, and marks the 15th consecutive month of gold accumulation.

Pang Ming interpreted the sustained buying as part of a broader global shift. Over the past year and more, central banks worldwide have increased gold allocations to hedge against volatility in dollar assets and to diversify geopolitical risk exposure. China’s continued purchases, he said, underscore a clear orientation toward raising the share of “non-credit assets” within the reserve portfolio, reflecting a stronger emphasis on safety and long-term stability amid accelerating adjustments in the global monetary system.

Wang Qing highlighted that even as international gold prices have surged and repeatedly set new records, the central bank has maintained a steady pace of incremental buying—signaling ongoing optimization of China’s international reserves. As of the end of December 2025, gold accounted for about 9.7% of China’s official international reserves (which mainly consist of foreign exchange and gold), still notably below the roughly 15% global average.

From a strategic perspective, Wang noted that gold is widely accepted as a final settlement asset. Increasing gold holdings can strengthen sovereign currency credibility and support the prudent advancement of RMB internationalization. He expects gold accumulation to remain a longer-term direction, and added that recent gold price volatility is unlikely to materially change this strategic trajectory.

From the World Gold Council’s perspective, its Americas CEO and Global Head of Research, Juan Carlos Artigas, said central bank gold buying is expected to remain a major variable in the gold market through 2026. In recent years, emerging-market central banks have been a key pillar of demand as they build strategic reserves. Globally, gold represents about 25% of central banks’ reserve assets; the share is around 30% for advanced economies and roughly 15% for emerging markets—leaving room for further increases as reserve structures diversify.

Artigas emphasized that central bank purchases reflect enduring trust in gold within the global monetary system, reinforcing its strategic role on central bank balance sheets. In a world defined by uncertainty, gold’s value as a strategic allocation continues to stand out—whether for hedging risk or enhancing portfolio diversification.

Pang Ming added that a series of smaller, repeated purchases can help smooth market fluctuations, capture more favorable cost windows, and reduce the price impact that could come with a one-time large purchase. This approach not only hedges macro risks earlier, but can also send constructive signals that help stabilize expectations at critical moments.

Since resuming this buying phase in November 2024, the central bank’s pace has remained steady. From November 2024 through January 2026, monthly additions were reported as 160,000 ounces, 330,000 ounces, 160,000 ounces, 160,000 ounces, 90,000 ounces, 70,000 ounces, 60,000 ounces, 70,000 ounces, 60,000 ounces, 60,000 ounces, 40,000 ounces, 30,000 ounces, 30,000 ounces, 30,000 ounces, and 40,000 ounces.

In Pang’s view, gold’s unique strengths—safe-haven protection, inflation hedging, and long-term value preservation—remain difficult to replace. As China continues to diversify its international reserves and dynamically adjust portfolio allocations, tactical operations involving gold may evolve, but the strategic direction of maintaining and gradually increasing gold holdings is unlikely to change.

(Author: Tang Jing | Editor: Zeng Fang)