The Financial Times reports that China’s holdings of US Treasuries are now at their lowest level since 2008.
The decline is notable considering that China once held US$1.3 trillion ($1.83 trillion) in US federal debt at its peak in 2013. That figure has since fallen to US$618 billion.
The Financial Times quotes asset manager Wei Li as saying the trend was part of a “diversification into gold and agency bonds, as well as other assets like equities”.
This is happening despite the fact that ‘real yields’ in the US are at their highest level since 2008. This is normally considered a bullish factor for bonds and negative for gold.
In fact, the tight correlation between the two factors broke down in 2022 and remains so today.
Source: Porter & Co
Gold would be US$2,000 per ounce if the old correlation still held, according to Porter & Co. It’s more than double that at around US$4,300 per ounce.
One reason is that central banks have become large accumulators. The World Gold Council says central banks have accumulated an average of 1,000 tonnes of gold a year over the past four years, double the average of the preceding decade.
The World Gold Council’s June 2026 survey found that 89% of respondents expected global central bank gold reserves to increase over the next 12 months.
This week, ANZ Group Holdings (ASX:ANZ) also notes that institutional demand from asset managers in China and India remains high, despite the gold price correcting lower over September.
Analyst Michael Howell commented recently:
“Because China maintains strict capital controls and limits access to alternative monetary inflation hedges, such as cryptocurrencies, gold has become the primary outlet for domestic demand seeking protection from currency debasement.”
Gold investing is not just a China story. Australian investors have also been adding to their gold ETF holdings, according to ANZ. The World Gold Council reported that Australian-listed gold funds attracted US$190 million in August.
It suggests that market participants are less preoccupied with interest rates and more concerned about sovereign solvency and stability, given the high level of government debt around the world.
Write to Callum Newman at Mining.com.au
Main image: Unsplash
