The global macroeconomic landscape continues to evolve, and gold's role in reserve diversification is becoming more prominent.
As of the second quarter of 2026, global central banks have been net buyers of gold for 23 consecutive quarters, with net purchases of about 289 tonnes in the second quarter of this year, up 62% year-on-year and the highest for any second quarter on record.
At the same time, capital continues to flow into gold through vehicles such as ETFs. Wind data shows that as of October 26, the Gold ETF E Fund (159934, feeder fund A/C: 000307/002963) had attracted about 5.7 billion yuan in net inflows this year.
The lesson for ordinary investors from central banks' continued gold purchases is not to follow any single purchase, but to treat gold as part of a portfolio for long-term allocation and to spread risk through diversification.
Sustained central bank buying reflects reserve diversification
According to Wind data, in the third quarter of 2020 global central banks were net sellers of 10.6 tonnes of gold, and every quarter since then has seen net purchases, extending to 23 consecutive quarters through the second quarter of this year.
In the second half of this year, the pace of buying has continued, with global central banks purchasing a net 23 tonnes in July and 39 tonnes in August.
Chart: Global central banks have increased gold holdings for 23 consecutive quarters. Source: Wind, as of the second quarter of 2026, quarterly central bank gold purchases (tonnes).
On the other side, as of the end of September this year, China's central bank had also increased its gold holdings for 23 consecutive months, adding 740,000 ounces (about 23 tonnes) in September, the highest monthly increase of this round of accumulation.
The persistence of this round of global central bank gold buying stems mainly from reserve diversification rather than a judgment on prices. During this period gold prices have risen, fallen and recovered, yet the amount of gold in central bank reserves has continued to increase gradually.
For this reason, understanding central bank gold purchases requires returning to gold's unique position in the credit system.
Gold's investment value does not depend on a single issuer's credit
Stocks depend on corporate operations, and bonds depend on the issuer's repayment. Holding these assets requires making judgments about future repayment capacity or operating performance.
Physical gold itself has no issuer repayment arrangement; its value foundation comes from scarcity, cross-market acceptance and sustained demand.
When assets are heavily concentrated in a certain currency or a certain type of debt, increasing gold allocation can help reduce dependence on the credit of the relevant issuers.
Turning to today's gold market, the debate over what drives gold prices is centered on the tension between Federal Reserve rate hikes and energy inflation.
On one hand, strong U.S. CPI performance has increased the possibility of an immediate Fed rate hike. Currently, the federal funds rate is between 3.75% and 4.00%. A CME FedWatch snapshot on October 26 shows a 90.6% probability that rates will remain unchanged in October, and a cumulative 79.7% probability that the target rate in December will be higher than the current range.
Table: Pricing for holding rates steady in October is high, while expectations for another hike in December remain. Meeting date 3.75%-4.00% 4.00%-4.25% 4.25%-4.50%. 2026/10/28 90.6% 9.4% 0.0%. 2026/12/09 20.3% 72.4% 7.3%. Source: CME FedWatch, October 26, 2026.
On the other hand, Brent crude oil is fluctuating around $110 per barrel, and persistently high oil prices could lift inflation and increase gold's appeal as an inflation hedge.
It is clear that the current gold market is not dominated by a single factor, and price volatility may continue, making one-sided bets difficult. However, the long-term allocation demand reflected in continued central bank buying offers investors a long-term allocation approach different from short-term trading: rather than agonizing over the timing of rate hikes and the level of oil prices, it is better to refocus on gold's long-term investment value in asset allocation.
After the pullback, watch medium- and long-term allocation opportunities
Back on the market level, as of October 23, London spot gold had seen a maximum drawdown of about 26% this year, with a closing price of about $3,995 per ounce that day, and the earlier sentiment-driven price deviation has been partly corrected.
With international gold prices back below $4,000 per ounce, the value proposition for allocation has improved somewhat. For investors, it may be worth watching medium- and long-term positioning opportunities within the volatile range rather than chasing gains and selling losses in the short term.
Chart: London spot gold price performance this year. Central bank gold buying has spanned price fluctuations, and ordinary investors can also allocate to gold through regular investment plans or phased purchases.
In terms of instrument selection, passive ETF products generally feature transparent rules, relatively low costs and convenient trading. Gold ETF E Fund (159934) invests in Au99.99 spot contracts on the Shanghai Gold Exchange, tracks domestic gold price performance, and provides on-exchange investors with a low-threshold, relatively liquid gold allocation tool; E Fund Gold ETF feeder fund (A/C: 000307/002963) is suitable for off-exchange subscriptions and regular investment plans.
Global central banks increasing gold holdings for 23 consecutive quarters convey a message of reserve diversification and long-term allocation thinking, rather than a short-term price signal. For ordinary investors, what is more worth learning is to treat gold as a long-term allocation tool in a diversified portfolio, using transparent and convenient tools such as ETFs to build positions in phases, allocate properly and spread risk.
Comments