China’s relentless gold accumulation will keep prices in a decade-long uptrend
NEW YORK (September 23) After a strong start to the year, Chinese gold demand has slowed significantly since the summer. While further demand could remain constrained due to higher prices, one bank says China will remain a dominant player in the marketplace for years to come.
In a report published Monday, commodity analysts at Société Générale noted that the People’s Bank of China has been buying significant amounts of gold over the last three years, but official reserves remain at extremely low levels compared to the central bank holdings of developed nations.
Quoting holdings data from the IMF’s International Financial Statistics, SocGen said that China’s central bank currently holds 2,300.40 tonnes of gold, which represents about 8% of its total holdings.
“This puts China 8th globally in terms of gold tonnage holdings. The average percentage held by all central banks, according to the IFS data, is 21.7%. Should China aim to achieve, say, 20%, it would require them, at today’s price of gold, to accumulate holdings of 5,337t of gold, an increase of approximately 3,036t from their current reserve level,” the analysts said. “Assuming the other seven banks with greater reserves of gold today did not increase holdings at the same time China accumulated tonnage, this would then make China the second-largest holder of gold in its foreign exchange reserves behind the U.S. (8,133.5t, or 77.9% of reserves) and ahead of Germany at 3,350t (77.6% of reserves).”
Not only does China still have a significant amount of gold to buy to be on par with other major economies, but SocGen also said it believes a significant amount of gold is flowing into China’s official reserves without being reported.
According to official data from the International Monetary Fund, China bought 2.9 tonnes of gold in July; however, after reviewing British revenue and customs data, SocGen said it suspects the central bank bought more than 14 tonnes.
At the same time, they estimate that China’s true monthly average central bank purchases since late 2022—excluding the six-month break in 2024—have been around 33 tonnes. The IMF data, by comparison, shows an average of 10.7 tonnes per month over the last three years.
Even if China’s central bank is buying more gold than it reports, the analysts said it would take nearly a decade for reserves to grow to 20%.
“To put this in perspective, since 2022, when central banks’ net flows have been positive, the average monthly flow across all central banks was 38t,” the analysts said. “So, the incremental level of 33t from China, despite it taking almost eight years to achieve its 20% of reserves gold holdings, should be extremely supportive of gold prices.”
Looking ahead, the analysts said they expect demand from China’s central bank to continue to support higher long-term gold prices.
“While high prices might slow or alter purchase patterns (buying on dips), strategic demand is unlikely to vanish, as the accumulation of gold is a geopolitical move, not just an economic one,” the analysts said.
In its latest price forecast, the French bank reiterated its call for gold prices to push above $4,000 an ounce next year. SocGen sees gold prices averaging $4,065 an ounce in the second quarter of 2026.
KitcoNews
