China is amassing gold reserves while allowing its currency, the yuan, to weaken. The People’s Bank of China (PBOC) has been purchasing gold for the second consecutive month, bringing its holdings to 73.29 million fine troy ounces, up from 72.96 million in November after a six-month hiatus in buying.

Gold prices surged last year, driven by the U.S. monetary easing and safe-haven demand, but cooled after Donald Trump’s election, which boosted the dollar. Currently, gold is holding steady around $2,634 per ounce, with traders anxiously watching the market due to uncertainty over Trump’s trade policies. U.S. Treasury yields are rising, while the dollar is weakening, creating a tug-of-war for gold prices. Hedge funds are also less optimistic about gold, with bullish bets at a six-month low, and Goldman Sachs has delayed its $3,000 per ounce gold prediction to mid-2026, citing fewer anticipated Federal Reserve rate cuts.

Meanwhile, China is letting the yuan weaken. It fell past 7.3 per dollar in December, its lowest since late 2023, signaling that Beijing may be loosening control to address economic pressures. The yuan’s drop has affected other currencies, such as Taiwan’s dollar and South Korea’s won. Chinese state banks briefly stopped intervening to sell dollars at the 7.3 level, allowing the yuan to fall further before stepping back in at 7.31. This shows that Beijing isn’t fully allowing the yuan to slide without restraint.