China's foreign exchange reserves rose in April, with gold reserves increasing for six consecutive months. How should investors choose amid a 5% fluctuation in gold investment?

The latest foreign exchange reserve data was released today. As of the end of April, China's foreign exchange reserves stood at approximately $3,281.7 billion, an increase of $41 billion compared to the end of March. Experts pointed out that the "reciprocal tariff" introduced by Trump in April caused the US dollar index to drop by about 4.4%, leading to a rise in the price of non-US dollar assets in China's foreign reserves.

In addition, the central bank continued to increase its gold holdings in April, with gold reserves reaching 73.77 million ounces by the end of April. Experts stated that the central bank's increase in gold holdings aligns with market expectations. From the perspective of optimizing the international reserve structure and promoting the internationalization of the yuan, the central bank's increase in gold holdings remains a major trend. Recent gold price fluctuations have been significant, and experts noted that the current gold price has reached a new level. Given the rapid market changes, the amplitude and frequency of gold price fluctuations are expected to increase in the short term and the future. Experts also warned that the risks of gold investment have increased, and investors should adopt a conservative approach.

Foreign exchange reserves rose by $41 billion in April.

According to statistics from the State Administration of Foreign Exchange, as of the end of April 2025, China's foreign exchange reserves amounted to $3,281.7 billion, an increase of $41 billion compared to the end of March, representing a rise of 1.27%.

In April, the Trump administration introduced "reciprocal tariffs" globally, intensifying expectations of a US recession and causing funds to flow into non-US markets, which led to a significant drop of about 4.4% in the US dollar index for the month. The decline in the US dollar resulted in an increase in the price of non-US dollar assets in China's foreign reserves.

Wang Qing, chief macro analyst at Oriental Jincheng, pointed out that the substantial increase in foreign exchange reserves in April was mainly driven by the significant drop in the US dollar index. It is estimated that this factor contributed to an increase of about $50 billion in foreign exchange reserves in April. At the same time, after the US introduced "reciprocal tariffs" in April, global capital markets experienced severe volatility. Among them, major market stock indices mostly declined. This offset the impact of lower US bond yields and rising US bond prices, exerting a slight downward pull on the valuation of China's foreign reserve assets.

The April Politburo meeting proposed to "focus on stabilizing employment, enterprises, markets, and expectations, and use the certainty of high-quality development to cope with the uncertainty of drastic changes in the external environment." On May 7, the central bank, the Financial Regulatory Authority, and the China Securities Regulatory Commission quickly implemented the Politburo meeting's work deployment and jointly launched a "package" of financial policies to support market and expectation stability.

"Currently, the international economic and trade situation is complex and severe. China is actively taking on the responsibility of a major country, upholding multilateralism, and strengthening communication and cooperation with neighboring countries and regions such as the EU. In the short term, this helps mitigate the risk of a decline in exports to the US. In the long term, China's advantage in the entire industry chain is irreplaceable, and its international competitiveness in goods is strong. Exports will continue to play a fundamental role in stabilizing cross-border capital flows."Wen Bin, chief economist at China Minsheng Bank, stated that China's domestic macroeconomic situation will continue to improve steadily with strong policy support, laying a solid foundation for maintaining an overall balance in the balance of payments and keeping the scale of foreign exchange reserves basically stable.

PBOC Increases Gold Reserves for Six Consecutive Months

In terms of gold reserves, data shows that as of the end of April, China's gold reserves stood at 73.77 million ounces, up 70,000 ounces MoM. This marks the sixth consecutive month that the PBOC has increased its gold reserves.

"There are signs of more structural shifts in gold allocation, such as Beijing allowing insurance funds to invest in gold, and global central banks are systematically increasing the share of gold in their total reserves," UBS Wealth Management predicts that central banks worldwide will purchase approximately 1,000 mt of gold in 2025, with net purchases by exchange-traded funds (ETFs) expected to reach 450 mt.

Recently, gold prices have experienced significant volatility. On April 22, international gold prices briefly surpassed the $3,500/ounce mark before jumping initially and then pulling back, subsequently falling below $3,400 and $3,300, and hitting a low of $3,273/ounce on April 23. As of today, spot gold is trading at $3,372.28/ounce.

"Investors and consumers have recently perceived gold prices as highly volatile because the base price of gold is now so high," Wang Lixin, CEO of the World Gold Council in China, told Caixin reporters, noting that a 5% fluctuation in gold prices is normal. However, the current base price of gold is too high.

Wang Lixin also stated that the current rise in gold prices has reached a new level, and with the rapid changes in market conditions, the amplitude and frequency of gold price fluctuations will definitely increase in the short term and in the future. While the percentage changes may seem small, the actual changes will be significant. "This volatility also serves as a risk warning to investors and consumers that the risks associated with gold investment have increased significantly. In this situation, investors should adopt a relatively conservative approach. Especially for non-professional investors, they should avoid using high leverage to invest in gold."

The industry generally expects that gold will remain well-supported due to ongoing tariff and geopolitical uncertainties. However, Jerry Chen, a senior analyst at GAIN Capital, believes that in the short term, the pressure on gold prices will come from whether the US Fed cuts interest rates. "If interest rates remain unchanged this week, coupled with progress in trade negotiations, it is expected to help the US dollar index stop falling and begin to rebound, while keeping gold prices under continued pressure."