Recently, the People's Bank of China released data that by the end of June 2025, China's gold reserves had reached 73.9 million ounces (about 2298.55 tons), an increase of 70000 ounces over the previous month, the eighth consecutive month of net increase in holdings. Since the beginning of this year, the enthusiasm of central banks in many countries to purchase gold has remained high, reflecting their consideration of global economic uncertainty, weakened US dollar credit, and geopolitical risks, which will have a sustained impact on the structure of foreign exchange reserves, gold price trends, investor decisions, and other aspects. Continuous optimization of foreign exchange reserves: Since the resumption of increased holdings in November last year, the monthly gold purchase volume of the People's Bank of China has shown a "first high and then stable" characteristic: in December 2024, it increased holdings by 330000 ounces, and from January to June 2025, the monthly average increase remained between 60000 ounces and 160000 ounces. The increase in gold holdings by China's central bank is a microcosm of the global central bank's "gold buying frenzy". According to data from the World Gold Council, the net gold purchases by central banks worldwide reached 1136 tons in 2024, the second highest in history; In the first quarter of 2025, China, Poland and Türkiye will be the top three buyers of global central bank purchases, accounting for more than 50% in total; In the global central bank purchasing survey, 95% of the surveyed institutions plan to continue increasing their holdings in the next 12 months, reaching a new high since the 2019 survey. Why do central banks of various countries continue to increase their holdings of gold? On the one hand, from the perspective of international balance of payments, increasing gold holdings by central banks of various countries can help optimize the structure of foreign exchange reserves. Dong Ximiao, Chief Researcher of China Merchants Association, stated that as a non sovereign credit reserve asset, gold is not affected by unilateral sanctions and its price trend is not completely consistent with other currency assets. Against the backdrop of increasing global economic uncertainty and continuous weakening of US dollar credit, the reasonable allocation of gold's proportion in foreign exchange reserves can effectively hedge the risk of losses caused by fluctuations in the exchange rate of a single currency. On the other hand, China's central bank's gold purchasing operations have formed a strategic resonance with the internationalization process of the renminbi. On June 18, Pan Gongsheng, President of the People's Bank of China, said at the 2025 Lujiazui Forum that the RMB has become the world's second largest trade financing currency, and the RMB has become the world's third largest payment currency in full caliber terms. The central bank's increase in gold holdings provides physical asset support for the upgrading of the role of the renminbi in the global monetary system, demonstrating the central bank's forward-looking layout in a complex international environment and helping to enhance international market confidence in the renminbi, "said Wu Dan, a researcher at the Bank of China Research Institute. In the long run, the trend of increasing China's gold reserves may continue. Wu Dan stated that although China's central bank has increased its holdings of gold for eight consecutive months, there is still a significant gap in the size of China's gold reserves compared to some developed economies. Based on strategic security and asset allocation needs, global central banks, especially emerging economies with limited gold reserves, will continue to strengthen their gold reserve layout. However, with the rapid growth of China's gold reserves, the central bank will adjust the speed and pace of increasing its holdings of gold in a timely manner based on policy objectives and market conditions. ”Dong Ximiao believes that the current international gold price is at a historical high and the volatility of gold prices is intensifying, which will to some extent affect the central bank's continued increase in gold holdings, and the speed of increase may slow down in the short term. The frequent fluctuations in gold prices will be supported to some extent by the central bank's continued increase in gold holdings. However, this does not necessarily mean that gold prices will rise. The central bank's purchase of gold is a long-term strategic behavior, which does not mean that the gold price will only rise and not fall. We need to be alert to the risk of short-term gold price fluctuations. ”Wu Dan said. From the past situation, there have been multiple instances where central banks of various countries have increased their holdings of gold but the price of gold has declined. For example, after the 2008 subprime mortgage crisis, central banks around the world increased their holdings of gold, especially from 2012 to 2016, when the amount of gold purchased by central banks was significantly higher than the amount sold. However, international gold prices continued to decline. In addition, the pace and intensity of central banks' increase in gold holdings vary among countries, and their short-term impact on domestic and international gold prices is also different. For example, from May to October 2024, the People's Bank of China suspended its increase in gold holdings, while domestic gold prices continued to rise. In the same period, the central banks of India, Türkiye and other emerging economies increased their holdings of gold, but the price of gold futures on the New York Stock Exchange and spot gold in London fluctuated significantly. Essentially, the increase or decrease of central bank holdings in gold reserves is not an absolute factor affecting gold prices. In most cases, central banks of various countries are also price takers in the global gold trading market. Zhang Lin, Chief Macro Researcher at Far East Credit, believes that for China's central bank, gradually increasing its holdings of gold is one of the strategic steps to adjust the structure of foreign exchange reserves, and arbitrage based on the upward trend of forward gold prices is not the main consideration factor. The price of gold has also experienced long-term fluctuations and corrections in history, with some periods of volatility even greater than the stock market. Since the collapse of the Bretton Woods system and the decoupling of gold from currency, the essence of the rise and fall of gold prices has been the investment volatility caused by the demand for safe haven. ”Zhang Lin stated that the rapid increase in international and domestic gold prices since 2022 is related to the continued turbulence of the global geopolitical situation, the deepening of major power games, and the weakening of the US dollar index. Overall, the pricing expectation for gold mainly reflects considerations of new uncertainties. Zhang Lin believes that the answer to whether the uncertainty in the future is greater or smaller is controversial, which is also an important reason for the divergence in the judgment of gold price trends among major global investment institutions. The impact of the central bank's increase in gold holdings is not only reflected in the gold market itself, but also affects the entire financial market. Does this mean that there is a window of opportunity for gold investment? Can we follow the actions of the central bank? These are issues that investors are generally concerned about. It is obvious that the central bank's continuous increase in gold holdings sends an important signal that the long-term safe haven nature of gold remains stable. Dong Ximiao stated that there are various ways and products to invest in gold. In addition to purchasing gold themed wealth management products and physical gold, investors can also pay attention to account gold (paper gold), deposit gold, gold ETF (exchange traded fund), and stocks related to gold. Financial institutions should be customer-oriented, actively and prudently promote innovation in gold related products and services, and provide investors with more choices. However, industry experts remind investors to avoid blindly chasing high prices when investing in gold. When ordinary investors flock into the gold market, it can be generally judged that the gold price has fully taken into account the current uncertainty expectations, and the investment demand brought by hedging needs may have reached its peak, "said Zhang Lin. He believes that at the current point where gold prices have rapidly risen to historical highs, investors who have entered the gold investment field and intend to increase their gold allocation should avoid increasing financial risks due to the pursuit of high returns, which is contrary to the safe haven logic of gold allocation. Liu Xiangdong, Chief Analyst of Dongyuan Investment, stated that for ordinary investors, they should rationally view the rise of gold in the past period, avoid blindly following the trend, and allocate gold reasonably based on their own risk preferences, asset size, family development stage, etc., prioritizing long-term value preservation needs over short-term price differences; For professional investors, they should pay attention to the volatility of the gold market, and comprehensively analyze the trend of gold prices based on factors such as US bond real interest rates, RMB exchange rates, global central bank gold purchasing trends, and market investment in gold. When there is high uncertainty in the stock and bond markets, gold can be used as a hedging tool to enhance the safety of investment portfolios. The saying 'either act early or not act' is a wise saying in the asset market. Whether it's fighting inflation or seeking safe haven, the key to the substantial returns that gold can bring to ordinary investors is long-term holding. ”Zhang Lin said. (New Society)