Gold and silver hit new highs together! China enforces strict export controls, halving global supply

Gold breaks $5,100, silver hits a new high of $109. China has increased its gold holdings for 14 consecutive months to 2,306.32 tons, and starting January 2026, silver exports will undergo “one case, one review,” halving the global refined silver exports and triggering a surge. Zijin Group acquires Canadian gold mines with 533 tons for $4 billion, accounting for 20% of China’s reserves.

China’s 14-Month Continuous Increase in Gold Reserves to 2,306 Tons

Since March 2025, the People’s Bank of China has increased its gold reserves for 14 consecutive months, currently holding about 2,306.32 tons, an increase of over 200 tons compared to the same period last year. Such sustained large-scale gold purchases are extremely rare among global central banks, indicating that China’s strategic allocation of gold has entered an accelerated phase. Monthly data shows an average increase of about 14 to 20 tons, demonstrating a stable and continuous buying rhythm that is not short-term speculation but a well-considered long-term strategy.

The timing of China’s gold accumulation is noteworthy. March 2025 marked the beginning of a weakening US dollar index and rising geopolitical risks. The central bank’s continued accumulation at this time reflects a keen judgment of changes in the global financial landscape. More importantly, China’s gold buying has not slowed despite rising gold prices. Even as gold surged from $2,000 to $5,100, the People’s Bank of China maintained steady monthly increases, highlighting a “strategic view beyond price” that underscores gold’s core position in China’s foreign exchange reserve diversification strategy.

With 2,306.32 tons, China’s gold reserves rank sixth globally, but relative to its $3.2 trillion foreign exchange reserves, gold accounts for only about 4%. This is far below the US’s 70%, Germany’s 67%, and France’s 64%. If China aims to raise its gold reserve ratio to 10%, it would need to purchase about 3,500 tons of gold. At the current monthly accumulation rate, this goal would take approximately 15 to 20 years. However, if China accelerates its gold purchases, the supply-demand structure of the global gold market will undergo a fundamental change.

China’s strategic intent behind increasing gold holdings is multifaceted. First, to diversify foreign exchange reserve risks and reduce dependence on US assets. Second, to hedge against geopolitical uncertainties, as gold is a borderless asset unaffected by sanctions. Third, to support the internationalization of the Renminbi, as major reserve currencies historically have substantial gold backing. Lastly, amid the global de-dollarization trend, the strategic value of gold as a neutral asset is being re-recognized.

Private demand for gold in China remains strong. In 2025, China’s total consumption of gold jewelry, bars, and coins exceeded 1,000 tons, ranking first globally for many years. This dual demand from official and private sectors makes China a key force influencing global gold prices. As China continues to buy, the global gold supply-demand balance tilts clearly toward demand, naturally pushing prices higher.

Silver Export Controls Lead to Global Supply Halving Crisis

Silver prices have surged, with China’s role being decisive. Starting January 1, 2026, China will implement strict controls on silver exports, with a “one case, one review” licensing system. The impact of this new policy far exceeds market expectations because China accounts for about 70% of global silver refining capacity and about a quarter of global silver demand.

It is expected that in 2026, China’s silver exports will sharply decline to 4,500–5,000 tons, halving from 10,000 tons in 2025. This effectively reduces global silver supply by nearly half, as other countries’ refining capacities cannot quickly fill this gap. Silver refining requires specialized equipment and technology, with new capacity taking at least 2 to 3 years to develop. During this period, the global silver market will face severe supply shortages.

This supply shock directly drives up global spot premiums. The spread between London silver spot prices and Shanghai futures prices widened rapidly after the policy announcement, with the London market experiencing rare rushes for physical silver. Tight inventories in London and Shanghai became key catalysts for silver prices soaring to a record high of $109/oz. COMEX silver inventories have decreased over 10% in the past two weeks, indicating a surge in physical demand.

China’s strategic considerations for implementing silver export controls are multifaceted. First, silver is an important industrial metal widely used in solar, electronics, medical fields, etc. As the world’s largest producer of solar panels, China needs to ensure sufficient domestic supply. Second, silver is also a monetary metal with hedging value during global financial turmoil. Third, controlling silver exports can serve as leverage in geopolitical negotiations, increasing China’s bargaining power in trade talks.

The “one case, one review” export permit system means each export must be individually approved, with approval times and standards full of uncertainty. This uncertainty has made international silver traders extremely nervous, prompting many companies to stockpile in advance to prepare for potential future supply disruptions. This preemptive hoarding further tightens the spot market, creating a self-reinforcing cycle of rising prices.

Therefore, with gold and silver prices soaring, China is arguably one of the biggest winners. China is both the world’s largest gold buyer and a dominant player in silver supply. This dual influence of “controlling both demand and supply” grants China unparalleled pricing power in the precious metals market.

Zijin Group’s $4 Billion Acquisition of Canadian Gold Mines: Strategic Intent

Following Canada’s Prime Minister’s recent statement that “our partnership with China lays a good foundation for embracing the ‘new world order’,” Zijin Mining announced yesterday its plan to acquire Canadian United Gold (a Barrick Gold asset or independent gold mine) for $4 billion. This deal ranks among the largest overseas mining acquisitions by Chinese companies, indicating that China’s strategic layout of global gold resources is accelerating.

By the end of 2024, Canadian United Gold’s gold resources amount to 533 tons, representing about 20% of China’s official gold reserves of 2,306.32 tons. In other words, Zijin’s acquisition provides a gold resource equivalent to about one-fifth of China’s official reserves. Such resource control has significant strategic importance for ensuring the security of China’s gold supply chain.

The $4 billion transaction price, based on 533 tons of gold resources, is about $750,000 per ton. At the current gold price of $5,100, each ton of gold is worth approximately $164 million (1 ton = 32,150.75 troy ounces). This means Zijin is paying a price well below the market value of the gold resources, since extracting and refining are required to turn these resources into salable gold, involving substantial capital and time costs. Nonetheless, the deal is still viewed as highly strategic by the market.

The timing of this acquisition is also intriguing. In the context of warming China-Canada relations and Canada’s Prime Minister expressing willingness to deepen cooperation with China, Zijin moved swiftly, demonstrating keen political sensitivity. Canada has abundant mineral resources and mature mining technology but has faced financing difficulties and rising operational costs in recent years. Chinese capital’s entry provides much-needed funding and opens a new channel for China to acquire overseas gold resources.

From a long-term strategic perspective, Zijin’s overseas acquisitions are not only about resource acquisition but also about learning advanced mining techniques and management experience. Canadian mining companies have rich experience in environmental protection, safety, and community relations, which are crucial soft skills for Chinese mining firms expanding globally. Through acquisitions and integration, Zijin can rapidly enhance its international competitiveness, laying a foundation for larger-scale global expansion in the future.

Risk Assets Showdown: Gold, Silver Outperform Bitcoin

Contrasting with the US’s support for Bitcoin, where political tensions have escalated. Trump personally admitted that the US government might shut down in 6 days, leading to social conflicts in Minnesota, with law enforcement controversies sparking protests nationwide. To make matters worse, Democrats hold a 79% absolute majority in midterm elections, crushing Republicans. If Republicans lose control of Congress after midterms, US crypto policies may only remain verbal.

In today’s volatile global situation, Bitcoin has simply “laid flat,” with prices hovering around $88,000, down over 10% from recent highs. More critically, whenever turmoil occurs globally, Bitcoin tends to lead the decline. This performance starkly contrasts with its “digital gold” positioning.

Gold and silver, during the same period, performed very differently. As panic sentiment rises, capital floods into precious metals, pushing gold from $4,800 to $5,100, and silver from $90 to $109. This violent rally of the “double kings” of precious metals reflects investors’ extreme unease with current turbulence and a strong preference for physical assets.

This contrast reveals a harsh reality: in the face of systemic risk, Bitcoin still behaves as a high-risk asset rather than a safe haven. Despite supporters’ long-term claims of Bitcoin as “digital gold,” market evidence shows that when investors truly seek hedging, they prefer the thousands-year-old store of value—gold and silver—over Bitcoin, which has only existed for 15 years.

Perhaps only after gaining support from major Eastern powers can Bitcoin truly become “digital gold.” China’s strategic layout of gold and silver contrasts with its cautious attitude toward cryptocurrencies like Bitcoin. This choice reflects a deep understanding of asset properties, risk characteristics, and strategic value. Physical assets like gold and silver possess intrinsic value, industrial applications, and a millennia-long monetary history, whereas Bitcoin’s value entirely depends on market consensus. This difference is magnified in extreme market environments.

From an investment portfolio perspective, gold and silver are not entirely opposed to Bitcoin but occupy different risk spectrum positions. Conservative investors should focus on gold and silver as core hedging assets, while aggressive investors may allocate some funds to Bitcoin seeking high returns. However, they should not expect Bitcoin to provide reliable protection during systemic crises. The recent high of gold and silver and the decline of Bitcoin serve as a vivid risk education lesson for investors.