USD DXY and Gold flows: Gold Temporary Correction or More?
Gold and Silver made modest gains after the Dec 29 sharp selloff, which traders feel was profit-taking by spec longs.
Though this is isolated so far, any renewed sharp selloff is seen favouring traditional safe haven such as CHF and JPY. Nevertheless, gold analysts feel that a missing piece of the jigsaw behind the gold price rise is unrecorded gold buying by China’s authorities. Speculation has been growing in the gold market that the surge in unrecorded gold purchases could be linked to China, due to UK shipment and China import data. Some bank estimates are that China has bought 250 tonnes this year, rather than the official reported 25 tonnes. China’s U.S. Treasury holdings in the TICS data are down USD58.5bln since the end of 2024, while 250 tonnes of gold are USD33.5bln at current prices. Why would China do this?
Overall, heavy unreported China buying of gold could have occurred in 2025 and also in 2022-24. This could be a combination of wanting to avoid upsetting Trump during a tense U.S.-China trade situation, the long-term goal of trying to move to onshore assets rather than FX assets that could be frozen, and general diversification reasons like other EM central banks. We doubt it is preparation for a 2027 Taiwan invasion. This could mean that though Gold could see corrections in 2026, they may not be the start of a major bear market in 2026.