China Buys 35 Tonnes of Gold Despite 5% Yields

Goldman Sachs estimates China bought 35 tonnes of gold through the London OTC market in July. This follows estimates of 48 tonnes in May and 40 tonnes in June. The People's Bank of China reported far smaller official additions for these months.

China’s holdings of US Treasuries fell to $618 billion in July. This is the lowest level since 2008. The data released on the same day the Federal Reserve raised rates for the first time since 2023.

Fed Hike Tests Reserve Strategy

The Federal Reserve lifted its benchmark rate by a quarter point to 3.75% to 4%. The 10-year Treasury yield crossed 5% earlier in the week. This marks the highest level since 2007.

Goldman’s view that central bank buying supports gold prices assumed a Fed on hold. The rate hike and the prospect of further increases change this dynamic. China’s gold buying is now a live test of reserve policy rather than a background trend.

Official Disclosures Remain Low

Goldman’s figures track flows through the London OTC market and trade data. They do not rely solely on central bank reports. The May estimate of 48 tonnes was nearly five times the 10 tonnes disclosed by the PBoC.

The Goldman number includes official purchases, representing total buying rather than hidden additions. The PBoC reported around 45 tonnes between May and July. This puts Goldman’s estimate at roughly 2.7 times the official figure for that period.

Yields Rise While Gold Falls

Gold pays no yield, so rising bond yields typically pressure its price. Gold dropped to about $4,230 after the Fed decision on Wednesday. It recovered to around $4,305, well below its record of roughly $5,590 in late January.

Central banks buy gold for protection rather than return. Goldman links the post-2022 buying wave to the freezing of Russia’s reserves after the invasion of Ukraine. This event demonstrated the risks of holding assets in vulnerable jurisdictions.