After reviewing the movements of the in the monthly time frame, I anticipate that this panic buying spree in gold started in November 2023 amid growing skepticism over the situation, which was supposed to take a sudden turn if Donald Trump won the presidential election on the basis of his steps taken during his first term from 2017 to 2021.
Undoubtedly, this thought came true soon he joined the office on Jan. 20th, 2025 while the extremely alert countries like China had already mapped the aftermath global economic situation well in advance to make the Chinese economy shock proof by raising its gold reserves up to a strongest level to maintain its global rank at number 2 position, and the China’s central bank started a buying spree in October 2023, much before Donald Trump won presidential election on Nov. 5, 2024.
I find that the current rally in gold seems to be a genesis of the panic buying spree by the Chinese central bank, have started to accumulate gold since October 2022 soon after end of covid epidemic when the gold futures were trading between a narrow range from $1635 to $2054, just to provide sufficient to its economy China was accumulating gold to hedge the surging global economic weakness.
Finally, this panic buying turned aggressive after a breakout by the gold futures out of this range in February 2024, and accelerated after the inauguration of U.S. President Donald Trump on January 20, 2025.
Now, the reason for this acceleration in buying spree was to start de-dollarization of China to ease its dollar dependence for trading to escape the dental impact of the imposition of trade tariffs by the Trump on the entire trading partners that shook the global economy as the denting impacts of these trade tariff policies are not only denting the economies of the trading partners but also equally denting the U.S. economy too.
Now, the question is – How much gold will be enough to diversify China’s reserves? https://www.investing.com/news/commodities-news/analysishow-much-gold-will-be-enough-to-diversify-chinas-reserves-4219669
This analysis by Polina Devitt and Kevin Yao, for Reuters, looks evident enough to dig into the reasons and the impact of this panic buying by China, coincide with a rally in gold prices from 2023 to 2025 that has driven the gold futures to test a record high at $3616 on Wednesday.
Undoubtedly, this surge also highlights a broader trend of developing economies seeking to diversify from the dollar after Western sanctions from $300 billion of Russia’s official reserves, about half of Moscow’s total, in 2022.
Undoubtedly, this panic buying spree in gold attract the attention of an analyst to dig the reasons and the possible impacts of this buying as the way gold prices went up during the last two years are about to reverse with equal speed as the China’s attempt to satisfy China’s urge to diversity its gold reserves as it has already ignored the strength of its own currency.
On comparing the directional moves of the gold prices with in monthly chart, I find that the Yuan has seen its extreme weakness at the current levels while the gold futures are at an extremely high levels which ensures both are ready for strong reversal from here as the China has to take care of the persisting weakness in Chinese Yuan while it has already stored a lot of gold in its reserves to maintain its position as the second largest economy of the world.
Finally, I conclude that the USD/CNY pair, after facing stiff resistance 7.3545, trading below the immediate resistance at 7.1864 as the 9 DMA is trying to pierce 20 DMA, look ready to form a bearish crossover in a monthly chart that would push the USD/CNY below the next significant support at the 50 DMA at 6.9868 shortly while the gold futures have formed a bearish hammer in a daily chart, after testing new high at $3616, waiting for some more exhaustion on Wednesday, if the gold futures find a breakdown below the immediate support at $3578.
Disclaimer: Readers are advised to take any position in gold and USD/CNY at their own risk, as this analysis is only based on observations.