Gold Holds Above $4,600 as China's 17-Month Buying Spree Rolls On

Gold Holds Above $4,600 as China’s 17-Month Buying Spree Rolls On

China’s relentless gold accumulation - now stretching past 17 consecutive months - is reshaping the supply-demand equation at a time when prices remain elevated despite a sharp monthly pullback.

What to know

• China has now added to its official gold reserves for at least 17 straight months, representing the longest sustained buying campaign by any single central bank in recent memory.

• Gold is trading at $4,685/oz, down nearly 8% from its monthly high of $5,229.70 but still well above levels seen a year ago.

• The gold-silver ratio sits at 64.9, suggesting silver has underperformed gold on the recent pullback, with silver down over 14% month-on-month.

What happened

China’s central bank has been accumulating gold for at least 17 consecutive months, a campaign that shows no signs of slowing. The People’s Bank of China has been steadily increasing its official reserves through a period of extraordinary price volatility - buying through dips, rallies, and everything in between.

Gold currently sits at $4,685/oz, having pulled back sharply from its monthly high near $5,230. That 8% drawdown might look dramatic in isolation, but the broader trajectory remains firmly upward. A year ago, prices at these levels would have seemed ambitious. Now they represent a correction.

The weekly picture tells a similar story. Gold is off about 2% over the past five sessions, while silver has taken a harder hit - down nearly 5% to $72.23/oz. The gold-silver ratio at 64.9 reflects silver’s relative weakness during the pullback, a pattern that tends to emerge when institutional and sovereign buyers favour gold specifically over broader precious metals exposure.

Who’s involved

China is the headline actor, but it is far from alone. Central bank gold demand globally has been running well above historical norms for several years now. The PBoC’s current campaign stands out for its duration and consistency. Seventeen months of uninterrupted purchases signals something more deliberate than opportunistic buying - this looks like structural portfolio rebalancing.

Other significant buyers include Poland, India, and several Gulf state central banks, all of which have been adding to reserves. But China’s purchases carry outsized weight given the scale of its foreign exchange reserves - estimated above $3 trillion - and the relatively modest share that gold still represents within them. Even after 17 months of buying, gold likely accounts for less than 6% of China’s total reserves, compared with over 70% for the United States and above 60% for Germany.

On the other side, Western institutional investors have been more ambiguous. ETF flows have been mixed, and the futures market has seen periodic deleveraging - contributing to the kind of sharp pullback we have witnessed this month.

Why it matters

The structural demand from central banks - China in particular - is creating a higher floor under gold prices. Each monthly purchase removes physical metal from the market and reduces available supply for other buyers. Over 17 months, those incremental additions compound into a meaningful shift in the supply-demand balance.

This matters especially now because mine supply growth remains constrained. New large-scale gold projects take a decade or more to develop, and the pipeline of future production has not kept pace with the acceleration in sovereign demand. Pullbacks - even aggressive ones like the 8% drop from the monthly peak - tend to find buyers quickly.

There is a geopolitical dimension too. China’s gold accumulation fits a broader pattern of reserve diversification away from dollar-denominated assets. The 17-month streak coincides with a period of heightened trade friction and financial sanctions risk globally. Gold serves as a sanctions-proof reserve asset, and Beijing appears to be pricing that optionality into its long-term strategy.

What to watch

The PBoC’s monthly reserve disclosures remain the most important data point. Any pause in buying would be significant - though the last time China halted purchases, it resumed within months and at a faster pace.

This week, the US ADP employment data could influence dollar direction and, by extension, gold’s short-term trajectory. A strong reading would support the dollar and could extend gold’s pullback toward the $4,600 level - which has acted as near-term support. A miss would likely trigger a swift recovery.

Beyond the weekly noise, whether gold can hold above $4,100 - the low end of this month’s range - on any deeper correction remains the open question. The gold-silver ratio deserves attention too; a move back above 70 would suggest broader risk aversion is building, while a decline toward 60 would indicate silver is starting to attract its own bid.

This article is for informational purposes only and does not constitute financial advice. Always do your own research before making investment decisions.