Gold reserves increase for 17 consecutive months. Experts: Considering all factors, the main trend moving forward is that the central bank will continue to increase its gold holdings.

Ask AI · Gold prices are at a historic high—why does the central bank keep adding to reserves?

Everyday Finance reporter: Zhang Shoulin Everyday Finance editor: Jia Yunkeko

On April 7, the State Administration of Foreign Exchange disclosed that, as of the end of March 2026, China’s foreign exchange reserves stood at $33,421.23 billion, down $85.7 billion from the end of February, a decrease of 2.5%.

In response, the State Administration of Foreign Exchange said that in March 2026, influenced by factors such as the global macro environment, monetary policies of major economies and expectations, the US Dollar Index rose and prices of major global financial assets declined. With the combined effects of factors such as currency translation and changes in asset prices, the size of foreign exchange reserves fell that month.

Wen Bin, Chief Economist at China Minsheng Bank, pointed out that in March, the conflict between the US and Iran continued to escalate. Iran imposed controls on the Strait of Hormuz, a key shipping route, disrupting Middle East crude oil exports, leading to a sharp surge in crude oil prices and a broad decline in global asset prices.

In addition, at the end of March, official reserve gold rose to 74.38 million ounces, up 160,000 ounces from the end of the previous month. This marks 17 consecutive months of increases in China’s gold reserves, and the amount of the increase also expanded. Wang Qing, Chief Macro Analyst at Orient Securities, said that although gold prices are at a historic high, from the perspective of optimizing the structure of international reserves, the necessity of increasing holdings of gold is rising. Judging comprehensively from various factors, the central bank’s move to add to gold holdings will still be the main direction going forward.

Foreign exchange reserves are relatively abundant

After several months of continuous growth, official foreign exchange reserves were reduced somewhat at the end of March.

In this regard, Wang Qing analyzed that in March, geopolitical risks in the Middle East erupted, driving safe-haven demand and accelerating the rise of the US Dollar Index, with a month-on-month increase of 2.41% (according to data from Tonghuashun), the largest increase in nearly 8 months. This will directly lead to the depreciation of non-US-dollar assets in China’s foreign exchange reserves, lowering the size of foreign exchange reserves denominated in US dollars. Based on his estimate, the impact of the US dollar’s appreciation in March on the size of China’s foreign exchange reserves was about $30 billion.

Meanwhile, fighting in the Middle East continued throughout March, causing a broad decline in global financial asset prices. Among them, in that month, the yield on 10-year US Treasury notes rose by 33 basis points, leading to lower prices for US bonds, while major global stock indices fell by a larger margin. Judging from the data, the decline in prices of major global financial assets in March had a greater impact on the valuation of China’s foreign exchange reserve holdings.

Wen Bin pointed out that in March, the increase in oil prices warmed inflation expectations, and the market even began to price in expectations of the Federal Reserve raising interest rates. Under the dual support of maintaining high interest rates for longer and safe-haven funds returning, the US Dollar Index continued to strengthen. Due to the combined effects of changes in asset prices and exchange-rate fluctuations, China’s foreign exchange reserves fell by $85.7 billion month on month to $33,421.23 billion at the end of March.

Specifically, Wen Bin analyzed that in terms of exchange rates, in March the US Dollar Index once broke through the 100 level and closed at 99.96 at month-end. Non-US-dollar currencies fell across the board: the Japanese yen, the euro, and the British pound against the US dollar declined by 1.7%, 2.22%, and 1.9%, respectively. Because China’s foreign exchange reserves are denominated in US dollars, the depreciation of non-US-dollar currencies would suppress the size of foreign exchange reserves denominated in US dollars. In terms of bond prices, inflation expectations led to the 10-year US government bond yield rising by 33 basis points to 4.3%, and the 10-year public bond yield in the euro area rising by 37 basis points to 3.09%. Global stock markets generally fell: the US S&P 500 index fell by 5.09%. The US stock market had already been moving downward due to volatility caused by historically high valuations of technology stocks, and the geopolitical conflict further intensified this trend. Japan’s Nikkei 225 index plunged by 13.23%. Japan is highly energy constrained and relies on the Middle East for about 95% of its crude oil imports, so capital markets reacted sharply to this conflict.

Wang Qing said that at the end of March, China’s foreign exchange reserves were still near the high end over the past 10 years, in a state that is relatively ample. Taking all factors into account, the scale of foreign exchange reserves is expected to remain basically stable around the level of $3 trillion. Against the backdrop of increased volatility in the external political and economic environment, a moderately ample scale of foreign exchange reserves can provide important support for maintaining the RMB exchange rate at a reasonable and balanced level, and can also serve as a “shock absorber” to help withstand various potential external shocks.

Stable foreign reserves have solid support

Exports lay the foundation for foreign exchange reserves. March’s import and export data have not yet been disclosed. Looking at January to February, driven by the marginal improvement in global demand, the entry of the world’s emerging industries into an upward development stage, and the strengthening of the competitiveness of China’s advantageous products, China’s foreign trade in imports and exports saw rapid growth in the first two months of this year.

Specifically, in RMB terms, in January to February, China’s total value of goods imports and exports increased by 18.3% year on year, accelerating significantly compared with the whole of last year. Both export and import growth rates rebounded: in January to February, the value of goods exports increased by 19.2%, accelerating by 13.1 percentage points compared with the whole of last year; the value of goods imports increased by 17.1%, accelerating by 16.6 percentage points.

From major trading partners, in January to February, China’s import and export growth rates with ASEAN, the European Union, and countries participating in the Belt and Road Initiative were all kept at around 20%. The rapid growth in imports and exports reflects China’s strong resilience and development vitality in foreign trade, and at the fundamental level also helps maintain the sustained basic stability of foreign exchange reserves.

Looking ahead to the next stage, Wen Bin pointed out that exports will continue to play the role of the basic pillar of the balance of payments. Since the beginning of the year, China’s export performance has far exceeded expectations—not only reflecting strong and resilient external demand, but also the results of diversifying export markets and upgrading the structure of exported products. Against the backdrop of oil price shocks disrupting global production and supply chains, China’s advantages in new-energy manufacturing and across the whole industrial chain will become even more prominent.

In terms of cross-border capital flows, as China continues to broaden market access for the services sector and steadily deepen institutional-level opening, the facilitation level for cross-border investment and financing has been continuously improving, and foreign direct investment will continue to operate steadily. At the same time, the valuation advantage and allocation value of RMB assets are becoming increasingly prominent, and securities investment is expected to continue to flow in at a reasonable scale. With China’s economy running generally steadily—progressing while maintaining stability—and delivering new results in high-quality development, there is solid support for maintaining the basic stability of the scale of foreign exchange reserves.

In addition, at the end of March, China’s official reserve gold rose to 74.38 million ounces, up 160,000 ounces from the end of the previous month.

Wang Qing said this is the 17th consecutive month of increases in official gold reserves. The amount of increased holdings that month reached 160,000 ounces, the highest in nearly 13 months. With the Middle East situation evolving and sharply pushing up international oil prices, and global expectations for monetary easing cooling off—including expectations for the Federal Reserve cutting rates—international gold prices fell by double digits in March. This may be a direct reason why the central bank accelerated its accumulation of gold that month. In addition, the outbreak of geopolitical risks in the Middle East is itself a factor driving central banks to increase gold holdings.

Wang Qing further analyzed that in the recent period, the fundamental reason central banks continue to increase gold holdings is that after the current US administration took office, global political and economic conditions have undergone new changes. This means that even though gold prices are at a historic high, from the perspective of optimizing the structure of international reserves, the necessity of increasing gold holdings is rising. Data shows that as of the end of March 2026, within China’s official international reserves mainly composed of foreign exchange reserves and gold reserves, gold reserves account for about 9.14%, clearly below the global average of around 15%. In addition, gold is a widely accepted ultimate means of settlement worldwide. By increasing gold holdings, central banks can strengthen the credibility of sovereign currency and create favorable conditions for advancing the internationalization of the RMB in a prudent and steady manner. Judging comprehensively from all factors, increasing gold holdings by the central bank will remain the main direction going forward.

Daily Economic News