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China is leading a global gold rush, and the numbers are impressive: in 2023, the country bought more of the precious metal than anywhere else on the planet. But what is behind this strategy? Recently, the discovery of a huge deposit valued at half a trillion reais reinforced Chinese interest in the resource, which had already been growing for years. With this, the country consolidates itself as the largest buyer of gold in the world, fueling debates about the impact of this movement on the global scenario.
In times of global uncertainty, such as the conflicts in the Middle East and Ukraine, gold stands out as a safe haven. In addition, it serves as a hedge against currency devaluation, something that worries Beijing given the economic challenges faced by the world's second-largest economy.
The People’s Bank of China (PBC) has stepped up its gold purchases over the past two years. According to the World Gold Council, the country purchased 225 metric tons of the metal in 2022, representing nearly a quarter of the purchases made by all central banks worldwide. In January and February 2023, the PBC added another 22 tons to its reserves, which now total about 2.264 tons.
In addition to the central bank, Chinese consumers are also investing heavily in gold coins, bars and jewelry. With the real estate market crashing, the yuan devaluing and the stock market volatile, the precious metal has become a haven for the population.
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Diversification of reserves and challenges to the dollar
China’s relationship with the US dollar is complex. Despite its dependence on the currency for international trade, the country is seeking to reduce that dependence. China’s dollar reserves have fallen by a third since 2011, a trend that has gained momentum since the pandemic.
Gold is a key piece in this diversification. Beijing's desire to reduce the influence of the dollar is in line with the goals of the BRICS bloc (Brazil, Russia, India, China and South Africa), which has discussed ways to strengthen their economies and even the creation of a common currency in the future.
Concerns about possible sanctions are also driving China's strategy. The freezing of reserves by Russia's central bank after the invasion of Ukraine served as a warning. With tensions rising between China and the United States, especially over Taiwan, the Asian country sees gold as a hedge against economic restrictions that could be imposed by Washington.
The Future of the Gold Rush
Despite the rapid pace of purchases, China’s gold reserves still account for about 4% of the PBC’s total, a low figure compared with central banks in developed economies. Many analysts believe that continued demand for the metal may not significantly impact prices, but the country’s interest in gold is far from over.
With its intrinsic value and multiple economic uses, gold remains a solid bet for China. Whether as a hedge in times of crisis or as a diversification tool, the precious metal is at the heart of the country’s strategy to face the economic and geopolitical challenges of the future.
