CITIC Construction Investment: The purpose and trend of central bank purchases
The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that the central bank's purchase of funds is a variable that cannot be circumvented by analyzing gold prices in recent years. Compared to market-based ETFs, etc., the central bank's gold purchase data is less transparent, making gold research more difficult. This round of central bank purchases is accompanied by some different characteristics. For example, central banks in many countries prefer domestic purchases and prefer domestic storage, which indicates that the underlying motive for this round of central bank purchases is not simple market-based management of foreign exchange positions, and is more in line with the general trend of monetary order reshaping.
After seeing this clearly, we can draw two conclusions:
First, the central bank's gold purchases are not the driving force behind every rise in gold prices, but the central bank's gold purchases can provide support for the gold price center.
Second, the story of the long-term rise in gold prices requires wary of a major reversal, that is, the alternation of the old and new monetary order. The old monetary system's disorder will eventually converge, and gold will enter the other side of the big cycle at that time. It's just that, judging from now on, it will take time to complete the reorganization of the monetary order.
CITIC Construction Investment's main views are as follows:
The best asset classes in 2025 are precious metals, gold, and silver.
Gold is being discussed at an unprecedented level. Behind the market-based factors, there is a “buyer” that goes long on gold receiving more and more attention — the central bank buys money.
Objectively speaking, since 2022, there has been a marked jump in the gold purchase ratio of central banks in many countries. What kind of opportunities does this reflect, and what kind of macro trends does it reflect? How will future central bank purchases be interpreted, and how will they affect the price of gold? These issues are currently a hot topic in gold research.
1. To buy funds by the central bank, we first need to eliminate some simple but incorrect micro “intuition”
Most of the central bank's gold purchases are not for direct transactions.
First, in reality, very few transactions directly use gold; second, the US dollar currently accounts for a very high share of cross-border transactions. Obviously, there is no such thing as using gold instead of the US dollar.
The US dollar accounts for nearly 50% of the international payment system, leading the way with an absolute advantage. While the price of gold has soared in recent years, the US dollar's dominant position in foreign exchange transactions (in the field of investment) has not declined; on the contrary, it has continued to strengthen.
There are obvious limitations to the credit-enhancing effect of central bank purchases on sovereign currency credit.
Cross-border transactions in a country mainly use the US dollar rather than the national currency. In order to “troubled times,” there is no need to trade in local currency, so there is no point in the logic that gold enhances credit in the local currency.
The creditworthiness of a country's currency does not come from how much money the central bank holds; it is more about international influence. The reality is that central banks (US, Japan, China) currently hold a relatively low share of gold (less than 1%) in total assets in all mainstream economies. It doesn't prevent their currency from being a world-class transaction currency.
Adding more or less gold to bolster local currency credit has very little effect. Take Canada as an example. The Bank of Canada reduced its gold reserves to close to zero in 2016. It is the only G7 country without substantial gold reserves, but this does not prevent the Canadian dollar from accounting for a relatively high share of the International Monetary Fund (IMF) reserve currency.
2. There are three types of real motivations for the central bank to buy funds
The central bank's motives for buying money are none other than three: commercial management, preparing for extreme situations, and reforming the monetary order to respond.
The first type of motivation, commercial position management.
Like ordinary gold holders, central banks also need to manage asset investments and switch asset allocations during the gold price fluctuation cycle, such as adjusting the ratio between US bonds and gold, so as to achieve the best return on assets. This kind of gold allocation behavior is essentially a market-based act, so I have seen that for quite some time in history, the central bank's money purchase behavior fits the market-based model of gold pricing.
The second type of motivation is to prepare for extreme situations.
In extreme cases, such as financial sanctions, a government may face payment and transaction difficulties. In this case, if there is gold, specific transactions can be carried out through gold in the international market. After all, gold, as the least controversial “co-current currency,” can be used as the last currency transaction medium under extreme circumstances.
In order to cope with extreme situations, central bank purchases are often accompanied by changes in gold storage territories, that is, central banks also migrate gold from international gold escrow centers to domestic countries. If you don't move your territory and buy gold, you only have a certificate of ownership of the gold, and you still won't be able to cope with the payment crisis in the form of financial sanctions.
The Bank of Russia has bought and sold gold in recent years, which is essentially the ultimate interpretation of this logic.
The third type of motivation is dealing with the reshaping of the monetary order.
In the process of restructuring the monetary system, the core influence of the old monetary system gradually receded, the core influence of the new monetary system increased, and there was implicit uncertainty in the monetary payment system in the process of alternating old and new.
To deal with this uncertainty, central banks buy and hold gold in case they need it. In this situation, the central bank's demand for gold purchases lasts too long and is not sensitive to short-term gold price fluctuations, and central bank purchases under this motive often become a central influencing factor in gold prices over a period of time.
However, once the replacement of the old and new monetary systems is completed, the central bank's purchase of gold stagnates, which often corresponds to a sharp decline in gold prices. This has happened more than once in history.
3. Two new phenomena of the central bank's increase in gold holdings in this round
First, more central banks with gold mining resources have begun to increase or are considering buying gold locally.
According to the latest central bank survey in 2025, more central banks are using local currency to buy gold directly from domestic artisanal and small-scale gold miners. The World Gold Council is particularly concerned that African and Latin American central banks have begun to directly mine gold domestically.
Compared to buying gold in the OTC market (traditional mainstream model), the deeper significance of local gold mining to supplement gold reserves is still that it can enhance the country's monetary sovereignty and financial autonomy.
Second, some countries are gradually shipping some of their gold reserves back to their home countries or considering storing them in new regional centers.
Traditional gold storage centers, represented by the three major gold escrow centers in New York, London, and Switzerland (represented by the Bank for International Settlements), are the result of a combination of historical choices, market practices, and geopolitics.
Due to asset safety considerations, some countries are gradually shipping some of their gold reserves back to their home countries or considering storing them in new regional centers.
According to the “2025 Central Bank Gold Reserve Survey”, 59% of the central banks surveyed chose “domestic” storage. Looking at specific countries, India, Serbia, Poland, Hungary, and Turkey have all taken steps to withdraw capital from the London Treasury.
Meanwhile, China is actively establishing new regional gold storage centers. Through the Shanghai Gold Exchange and its innovative “Golden Corridor” — a high-tech treasury network spanning the BRICS countries and the “Belt and Road” countries.
4. Implications for gold prices under the central bank's money buying behavior
After the pandemic, the world entered a “chaotic period”. The wave of technology, fiscal expansion, trade games, and supply chain reshaping echoed these shocks in the real economy and at the political level. The global monetary and financial system also experienced a shock. Gold soared, clearly expressing the world's concerns about the old monetary order.
Looking at central bank purchases in line with major global trends. In particular, this round of central bank purchases also has strong characteristics of domestic purchases and domestic storage behavior. The underlying behavioral logic is quite clear, dealing with emergencies and monetary order reshaping.
After seeing this clearly, we can draw two conclusions:
First, the central bank's short-term gold buying behavior can provide support for the gold price center.
Second, the story of the long-term rise in gold prices requires wary of a major reversal — the construction of a new monetary order has been completed. The old monetary system's disorder will eventually converge. At that time, gold will enter the other side of the big cycle, but this process will take time.