China is playing a key role in the ongoing rise in gold prices. (Source: Getty)
For most of recorded human history, gold has been at the centre of our economic systems. From the Aureus – the golden coinage of the Roman Empire – to the great golden treasures of the new world which would help power Spain’s rise to become the world’s first superpower, gold and who holds it, has defined the course of events.
Central banks, and most notably China, have been boosting their stores of the precious metal in the past year or so.
Now in October 2025, as lines to purchase physical gold stretch down the block in some of the nation’s cities, many have been left wondering asking some big questions.
What is China up to? And is gold sending a signal that may define events in the months ahead?
RELATED:
(Source: MacroTrends)
Despite gold holding the collective imagination of investors today, it hasn’t always been like this.
In 1997, the Reserve Bank acting on orders from then Treasurer Peter Costello sold the vast majority of Australia’s gold reserves, with over 165 tons of gold being sold on the open market.
In this, Australia was not alone, in recent decades Britain and Canada both sold off a majority of their gold reserves.
In short, not too long-ago in the grand scheme of things, gold was seen by many in the world of economics and finance as superfluous, a relic of a bygone era.
As the world turned away from gold following its peak in September 1980, prices would remain depressed below this peak level for over 26 years.
In inflation adjusted terms, the recovery was only completed in October last year, a wait of a little over 44 years.
(Source: MacroTrends)
When Western governments and central banks froze roughly half a trillion dollars’ worth of Russian reserve assets in 2022, following Moscow’s invasion of Ukraine, it sent shockwaves throughout the world.
In the words of author and financial market veteran Simon Ree:
“Beijing learned an important lesson: gold can’t be sanctioned…and can offer a firewall against dollar weaponisation.”
This was a lesson that China and others acted upon quite swiftly.
In the 2019 calendar year, the world’s central banks and other institutions purchased 605 tons of gold in net terms.
By the time of the peak on a rolling 12-month basis in June 2023, net purchases had risen to over 1,300 tons.
(Source: MacroTrends)
Not long after, the price of gold would begin it’s steady and then meteoric rise, from $2,518 ($1,632 USD) in October 2023 to $6,297 ($4,082 USD) this week.
Story Continues
Meanwhile, Beijing has embarked on an attempt to become the custodian of the gold reserves of various nations and institutions, to further strengthen its position as a player in the world of global finance.
Winning the confidence and trust of foreign nations to hold their gold reserves has historically been a challenging task, but once realised was a signal of very serious trust and of growing geopolitical clout.
According to an analysis by Apollo Global Management’s Chief Economist Torsten Slok, the role of China in the current demand for gold has played a critical role in the recent price movements:
“China is playing a key role in the ongoing rise in gold prices because of central bank buying, arbitrage trading, and increased speculative and safe-haven demand among Chinese households,” he wrote this week.
In his commentary Slok went on to cite statistics from Chinese commodity futures markets, reporting that the level of gold being stockpiled has skyrocketed in recent months.
(Source: China Futures Exchange/Apollo Chief Economist)
American banking pioneer J.P Morgan once said:
“Gold is money. Everything else is credit.”
In 2025, outspoken US hedge fund manager Ray Dalio is making a similar case:
“Gold has begun to replace some US Treasury holdings as the riskless asset in many portfolios, most importantly in central banks and large institutional portfolios.
“By the way, anyone with a long-term historical perspective would say that, compared to Treasuries or any other fiat currency denominated debt, gold is the more riskless asset.” Dalio wrote.
If Dalio is correct and this trend continues, it would mark a major departure from the current US Treasury bond-based reserve system which has now been in ascendancy for more than five decades.
On a long-term time horizon, this scenario would result in an absolutely seismic shift in the tectonic plates that underpin the global financial system.
RELATED: Commonwealth Bank issues stark warning to buckle up as Australia faces ‘new economic era’
Within the finance and economics community the views on the meteoric rise in the price of gold are deeply varied, with a wide range of perspectives between the two extremes.
For some, it’s a signal that markets are calling time on irresponsible governments and central banks, calling into question the very viability of fiat currency or of the US led international financial order.
At the other end of the spectrum there are those who see it as the latest in the long line of speculative bubbles, with this one finding its foundations in demand from governments and central banks, before broadening dramatically to include people queueing to buy gold on Australia’s streets.
Gold may well be in a bubble, in the same way that it has been multiple times since the administration of US President Richard Nixon abandoned the gold standard in 1971.
But at the same time, it’s entirely possible that this is an expression, to some degree, of a loss of faith in the underlying foundations of the current US-led financial and economic system. A system that by its very design delivers the ongoing devaluation of purchasing power of our money, in Australia and throughout the world.
Meanwhile, in the Middle Kingdom, the Chinese government continues to amass it’s own gold reserves, with plenty of observes suggesting the ruling communist party is doing so at a much greater level than has officially been stated – so much so that Simon Ree referred to it as “The Great Gold Conspiracy Theory”.
How exactly this chapter of gold’s history will end remains the multi-trillion dollar question.
Ultimately, it would not be unprecedented for a swift meteoric rise in the price gold to end with a bang, rather than a whimper.
Get the latest Yahoo Finance news – follow us on Facebook, LinkedIn and Instagram.