The People's Bank of China has increased its gold holdings for 16 consecutive months, with Middle East turmoil boosting safe-haven demand

Investing.com — The People’s Bank of China (PBOC) has increased its gold holdings for the 16th consecutive month in February, continuing to bolster its gold reserves amid rising demand for safe-haven assets driven by escalating geopolitical tensions in the Middle East.

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Against this backdrop, spot gold rose 1.85% to $5,171.12 per ounce as of 4:00 PM Eastern Time (9:00 PM GMT), rebounding sharply from the intraday low. Data released on Saturday showed that the PBOC added 30,000 troy ounces of gold, bringing its total gold reserves to 74.22 million troy ounces.

China’s latest gold accumulation continues the structural de-dollarization trend that began at the end of 2024.

Geopolitical tensions boost gold demand

Gold recently regained the psychological $5,000 level, benefiting from worsening global security conditions. After the US and Israel launched joint military actions against Iran targets, investors sharply withdrew from riskier stocks and shifted to defensive assets.

Global central banks showed signs of seasonal slowdown in gold purchases in January. On average, central banks bought only 5 tons of gold, compared to a monthly average of 27 tons last year. Analysts believe that “oil shocks” and regional instability will sustain gold accumulation throughout 2026.

Marissa Salim, an analyst at the World Gold Council, said: “Price volatility and holiday seasons may cause some central banks to hold back.” She emphasized that geopolitical risks “show little sign of diminishing,” which could keep institutional demand high. In the ETF market, US-listed gold ETFs saw a net inflow of $4.5 billion in February, indicating retail and institutional sentiment aligning with central bank actions.

Reserve divergence and liquidity needs

The gold market is witnessing significant divergence in central bank strategies. The broader trend of accumulation is led by East Asian and Central European countries. Poland’s central bank was previously one of the most aggressive buyers but recently proposed selling part of its reserves to fund urgent domestic defense spending.

Russia and Venezuela’s central banks have also become recent sellers, possibly to boost liquidity amid tightening sanctions and economic isolation.

During the data release, the USD/CNY exchange rate remained relatively stable at 6.8968. However, China’s continued gold purchases highlight a long-term strategic shift aimed at insulating its economy from currency fluctuations.

JPMorgan analysts currently forecast that gold prices will average $5,055 by the end of 2026. They believe that the ongoing “pent-up” demand from central banks is a key support for the market, despite short-term volatility driven by changes in US monetary policy.

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