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China appears to be loading up on gold ahead of US President Donald Trump's inauguration on January 20.
In December, China's central bank added 330,000 troy ounces of gold to its reserves in a second month of expansion of its gold stash, according to official data released on Tuesday.
As of December, China held 73.29 million ounces of gold, up from 72.96 million in November.
China's building up of its gold reserves came after a six-month hiatus, during which the world's second-largest economy held back on purchasing amid record gold prices.
The spot gold price reached a historic high of nearly $2,800 an ounce before pulling back.
Spot gold is now around $2,650 an ounce due to gains in the US dollar following Trump's election. A stronger dollar typically weighs on the gold price because the yellow metal is denominated in the greenback.
The rise in China's central bank gold reserves comes as the world's second-largest economy continues to struggle to recover following the pandemic. Its numerous challenges include a property crisis, deflation, and high youth unemployment.
The Chinese yuan also lost ground against the dollar last year and is at a 16-month low.
Ray Jia, the research head for China at the World Gold Council, wrote in a report last month that he expects investment demand for gold to be supported this year due to potential losses in the yuan and the likelihood of lower interest rates.
"If official gold purchase announcements resume, which have been a key driver of gold investment demand in past years, gold investor sentiment will receive an additional boost," Jia wrote.
Gold had a blistering rally last year as spot prices gained nearly 30%, prompting some investors to hold back. Some analysts forecast demand for the precious metal to stay strong this year.
Goldman Sachs expects gold to soar to $3,000 an ounce by the second quarter of 2026 on the back of the Federal Reserve's rate cuts, it said in a note on Sunday.
The investment bank also expects higher central bank demand to continue driving gold price gains. This demand is in part due to central banks diversifying their assets from the US dollar into politically natural gold, a time-tested safe haven.
Goldman Sachs pushed back last month's prediction for gold to hit $3,000 an ounce from the end of 2025 as Fed Chair Jerome Powell indicated later in the month that it is likely cutting rates at a slower pace this year.
In December, Goldman Sachs cited central bank demand, as well as geopolitical and equity market uncertainty as support for higher gold prices.
"When trade tariffs — a key feature of our FX strategists' 2025 stronger for longer dollar outlook — or more broadly geopolitical shocks drive dollar strength, the dollar and gold prices tend to rise together," the analysts wrote.
Marcus Garvey, the head of commodities strategy at Macquarie Group, also has eyes on the $3,000 level.
"If Chinese investor buying returns or markets fear that President Trump's policy proposals could deliver a material deterioration in the US fiscal outlook, the price could quickly challenge $3,000/oz, with any breaks above October's high liable to be reinforced by systematic momentum buying," Garvey wrote in a Saturday note.
Trump has threatened 60% tariffs on all Chinese goods, which analysts say would push up inflation in the US.
