China Extends Record Gold-Buying Streak as September Purchases Accelerate
TREE NEWS reports: China’s central bank purchased another 740,000 ounces of gold in September, lifting its total holdings to 77.47 million ounces (roughly 2,409.59 metric tons). The monthly increase outpaced August’s 650,000-ounce addition, extending an uninterrupted buying streak to 23 consecutive months. September’s haul was the largest single-month increase in recent months, signaling that Beijing remains committed to accumulating bullion even as international prices swing violently.
At the same time, China’s foreign exchange reserves slipped to $3.4003 trillion at the end of September, down $38.1 billion, or 1.11%, from a month earlier. Authorities attributed the decline to a stronger US dollar and broadly lower global asset prices, which weighed on the valuation of non-dollar holdings when converted back into the greenback.
Why the Central Bank Keeps Buying
The 23-month streak is more than routine diversification. With gold now accounting for a growing share of China’s reserve mix, the central bank is steadily reducing its relative exposure to dollar-denominated assets. This is a strategic, multi-year reallocation that is largely insensitive to short-term price moves — a point that matters enormously for how investors should read the gold market right now.
Gold Prices Under Pressure — But the Floor Holds
Despite persistent central bank demand, gold has had a rough month. COMEX gold futures fell 6.52% in September, pressured by expectations of further US rate hikes and rising bond yields, which erode the appeal of a non-yielding asset. HSBC cut its gold price forecasts, citing the prospect of another Federal Reserve rate increase in December and near-term headwinds from higher oil prices. The bank now sees gold averaging $4,490 per ounce in 2026, down from $4,560, and $4,825 in 2027, down from $4,925.
Yet the more striking signal comes from positioning data. Deutsche Bank research shows that commodity trading advisors (CTAs) now hold their largest net short position in gold since October 2021. In just one month, CTAs liquidated 52% of their maximum position size — a monthly outflow in the third percentile historically, an extraordinarily rare wave of selling. Despite this capitulation-level pessimism, gold has not made a new low. Central bank buying is the reason.
Market Implications
- Gold: The tug-of-war between bearish speculative positioning and relentless official-sector demand defines the current setup. With short positioning stretched to extremes and momentum sellers largely exhausted, the risk-reward for a reversal has rarely looked more asymmetric.
- US Dollar: Continued reserve diversification by major central banks is a slow-burning structural headwind for the dollar, even as near-term rate differentials keep it firm.
- Bonds: Rising yields are the primary near-term drag on gold. Any sign that the Fed’s hiking cycle is peaking would remove that headwind quickly.
- Equities and Crypto: A gold reversal driven by peak-hawkish Fed expectations would likely coincide with a broader risk-on rotation, benefiting rate-sensitive and liquidity-driven assets.
Key Takeaways for Investors
- Central bank gold demand is structural, not tactical — it provides a durable floor under prices that speculative flows cannot easily break.
- Extreme CTA short positioning has historically preceded sharp reversals; the failure of gold to make new lows despite record selling is a meaningful tell.
- Watch the December Fed meeting closely. A pause or dovish pivot would be the single most powerful catalyst for gold — and a headwind for the dollar.
- For long-term allocators, the 23-month buying streak underscores gold’s role as a strategic reserve asset in a fragmenting monetary system.
