China’s central bank is steadily increasing its gold reserves, achieving growth for the ninth month in a row. By the end of July, China held 73.96 million ounces of gold, up from 73.90 million ounces in June. In monetary terms, these reserves are now valued at $243.99 billion, an increase from $242.93 billion the previous month. This strong demand for gold has helped raise its prices since last year.

China’s Gold Acquisition

Since April, confidence in the dollar has been declining due to inconsistent U.S. policies, which is having an impact on the market. China’s consistent gold purchases are a clear signal, as they have added to their reserves for nine straight months as of July. This ongoing buying helps support gold prices, which surpassed $2,600 per ounce earlier this summer. The trend continues, with global central banks adding over 230 tonnes of gold in the second quarter of 2025 alone. Gold’s strength is connected to the dollar’s weakness. Following the Fed’s unexpected policy change in May 2025, confidence has weakened, causing the US Dollar Index (DXY) to drop from over 105 late last year to about 101.50 recently. This trend of moving away from the dollar makes gold more appealing for large institutions. For traders dealing with derivatives, now may be a good time to adopt a bullish stance on gold. Purchasing call options on gold futures or ETFs like GLD in the coming months can directly capitalize on this momentum. The implied volatility reflects uncertainty, but the overall price trend seems strong.

Trading Strategies for Gold and Dollar

There are also opportunities to trade based on the difference between gold and the dollar. A pair trade—buying gold futures while shorting dollar index futures—can help hedge against broader market fluctuations. This strategy is designed to benefit from central banks diversifying away from the US dollar. We’ve seen a similar pattern before, especially in the years after the 2008 financial crisis, when central bank purchases led to a long bull run for gold. Looking forward, any signs of more geopolitical instability or dovish comments from the Fed could give this rally an extra boost. Traders should keep an eye on these potential catalysts in the weeks ahead. Create your live VT Markets account and start trading now.

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