Is China Taking Control of the Gold Market?

Investing in gold has only increased in popularity over the past few years. As market uncertainties continue to drive investor sentiment in conflicting directions, more and more people have begun to diversify their investments and purchase quantities of physical gold. 

But gold is attractive to more than just individual retail investors because of its steady (if not increasing) price. While nations have always accumulated gold as part of their reserves, some countries, including China, have increased their gold holdings over the past few years. 

China has asserted itself as the world’s No. 2 economy and an economic powerhouse. However, to continue building upon that growth, it must seek ways to cement itself and its interests at the center of global monetary policy and trade. 

One major way to do that? Accumulate gold. 

How Much Gold Does China Have?

It should be noted that the People’s Republic of China hasn’t historically disclosed its gold holdings publicly, but that has changed recently. According to the World Gold Council, China’s gold reserves have increased to 2,264.87 tons. Other estimates claim the Chinese may have amassed as much as 30,000 tons of gold. 

Even with these conflicting estimates, it’s not too difficult for China to have significantly bolstered its reserves in recent years. The country has been the leading buyer and producer of bullion for some time now, with its gold mines producing several hundred tons of gold annually. Because gold is a finite resource, accurately knowing how much of the world’s gold supply China has access to is important for investors and competitor nation-states alike.  

The opaque numbers may concern some investors, but diversified reserve holdings—including China’s gold purchases—aren’t necessarily a threat to the U.S. dollar as the leading global reserve currency.  

Chinese Government

According to the World Gold Council’s statistics, China has added to its official gold reserves by purchasing the precious metal for 18 consecutive months through April 2024. Gold accounts for nearly 5% of the nation’s official reserves. And while that’s technically the highest official level ever, it’s important to note that those official figures could understate the amount of gold China actually owns. 

Some experts speculate the additional reserves will create a gold-backed domestic or international trade currency as part of the BRICS bloc of countries (Brazil, Russia, India, China, and South Africa).  

When you add these reserves to recent Russian gold acquisition and production efforts, Indian gold purchases, and South African gold production, a BRICS currency arrangement that coalesces around gold could be seen as a significant inroad against the U.S. dollar’s economic hegemony. Distancing themselves from reliance on the dollar and the U.S. banking system may help these countries insulate themselves from U.S. sanctions. 

Is China Stocking Up on Gold?

Why is this move away from the U.S. dollar important?  

China continually seeks further influence in global monetary affairs. One way for the country to continue to increase its influence is to have its currency become part of the International Monetary Fund’s monetary reserve denominator. The IMF created this Special Drawing Right, or SDR, in 1969 to support the Bretton Woods exchange system. 

Currently, the SDR comprises the U.S. dollar, Chinese renminbi, euro, Japanese yen, and British pound sterling. China’s continued leverage as a market currency would be symbolic and could help solidify the renminbi’s place among the world’s elite currencies. Having more gold in its reserves could bolster China’s position. 

Another way to look at this, however, is that China recognizes that significant changes could be underway in global trade. A push to move away from the dollar is already taking place, and China will likely want to do all it can to position its currency as the reserve currency of the globe. 

Amassing sizable gold reserves and having its currency become part of the SDR are both big steps in that direction. 

China’s lack of transparency regarding its gold holdings is especially interesting given that many other emerging market central banks have also been adding to their gold reserves. Countries like Russia, Turkey, and Iraq have all been buying gold in recent years, and that trend appears to be ongoing. 

While estimates of China’s reserves vary greatly, it appears that the country is actively adding gold to its reserves—and doing so for good reason. If the country has assembled anywhere near the higher estimates of 30,000 tons of gold, it could put its currency in a considerably strong position. 

China knows what is at stake, no matter how much gold they’ve officially (or unofficially) added to their reserves. The yuan—the principal unit of China’s official currency, the renminbi—will likely continue to gain further acceptance from the global financial community, and having more of its reserves in gold will only add to its appeal. 

Get Your Hands on Gold and Other Bullion With a Gold IRA

What do China’s expanded gold reserves have in common with your investment portfolio? Quite a bit, actually. China understands the importance of diversified investments as part of its treasury reserves to meet its goals. When it comes to your retirement portfolio, you should, too. 

Investing in physical gold for your Gold IRA allows you to hedge against inflation and diversify your portfolio. You can even protect against market fluctuations by buying a stable physical asset you can hold in your hands. 

To learn more about how a precious metals IRAs can add value to your current investments, download our free guide to rolling a 401(k) into a Gold IRA today.