This article first appeared on GuruFocus.
Gold’s explosive rally past $4,000 an ounce has given Beijing a rare tailwind in its long-running effort to reduce reliance on the US dollar. After years of quietly building one of the world’s largest bullion reserves, China is now using the metal’s historic ascent to advance a bigger geopolitical goal: positioning the yuan as a credible reserve currency backed by tangible assets. Analysts say the combination of Trump-era trade uncertainty, mounting US fiscal risks, and global demand for inflation hedges has created a window for China to step forward. Ding Shuang, chief economist for Greater China at Standard Chartered (SCBFY), noted that the current environmentmarked by geopolitical volatility and the rise of alternative paymentsis ideal for Beijing’s ambitions.
Beijing has been methodically expanding its influence in global bullion markets. The Shanghai Gold Exchange recently opened its first offshore vault in Hong Kong, and policymakers have been encouraging other central banks and sovereign funds to store their reserves in China’s bonded warehouses. The next step, analysts suggest, could be allowing these institutions to trade and lend gold onshoremuch like they do in London. Such moves would elevate China’s status as a custodian of global reserves while reinforcing the renminbi’s credibility as a stable asset. Although gold accounts for less than 9% of China’s total reserves, compared to a global average of around 20%, steady monthly purchases by the People’s Bank of China indicate that accumulation is far from over.
China’s playbook has also drawn lessons from Moscow. After Western sanctions froze Russia’s foreign reserves, domestically held gold became a critical shield against financial isolation. For Beijing, gold now serves a similar strategic purposean anchor of stability in an increasingly fragmented financial world. Economists argue that as global investors embrace the debasement trade, shifting from fiat currencies toward hard assets like gold and silver, China’s accumulation strategy could prove transformative. With bullion emerging as both an inflation hedge and a geopolitical hedge, the metal’s climb may not just reflect market momentumit could mark the quiet rise of a parallel financial system centered on Shanghai rather than Washington.
