Why gold could touch Rs 1.77 lakh in 2 years — experts link rally to China’s buying spree

Global gold prices are on an unprecedented rise in 2025 — and analysts say the rally is far from over. The yellow metal, which has already gained more than 50% this year, recently crossed US$4,000 per ounce in London, driven by mounting geopolitical risks, a prolonged U.S. government shutdown, and a steady decline in investor confidence in the dollar.

The People’s Bank of China (PBoC) has now been adding to its gold reserves for 11 consecutive months, underscoring the country’s determination to diversify away from the U.S. dollar. In September alone, the PBoC purchased 40,000 ounces, taking its total reserves to 74.06 million ounces, valued at US$283.3 billion.

According to Torsten Slok, Chief Economist at Apollo Global Management, one of Wall Street’s most followed macro strategists, China has emerged as the single biggest driver behind this historic gold rally. In his widely read note, The Daily Spark, Slok pointed out that China’s influence goes far beyond central bank buying — it extends into household consumption, arbitrage trading, and institutional diversification.

Wealth and stock analyst Ak Mandhan noted that China’s persistent gold accumulation is not a short-term play but a calculated long-term strategy. “Gold will touch Rs 1,77,000 in the next two years — and that’s precisely why China keeps buying, even after gold’s record-breaking run,” he said.

Mandhan explained that Beijing’s continued accumulation reflects a broader shift away from U.S. assets and towards “real” value stores such as gold, especially amid global economic uncertainty.

Investment banks echo this optimism. Goldman Sachs recently upgraded its December 2026 gold forecast to US$4,900 per ounce, while billionaire investors Ray Dalio and Ken Griffin described gold as “the ultimate hedge” in an era of fiscal instability and deglobalisation.

Why China’s strategy matters

Experts outline ten major reasons why China continues to buy gold aggressively, even as the yuan weakens:

De-dollarisation: Reducing dependence on U.S. Treasuries and protecting reserves from sanctions or volatility.

Currency Hedge: A weaker yuan increases local gold value, shielding China’s reserves.

Credibility Boost: Large gold reserves lend long-term trust to the yuan as a trade currency.

Sanction Shield: Physical gold cannot be frozen or seized in a crisis.

Diversification: Selling U.S. bonds while increasing gold exposure reduces policy risk.

Balance Sheet Strength: Gold enhances central bank asset quality during market turbulence.

Capital Confidence: Amid slowing growth and capital flight, gold buying reassures domestic investors.

Trade Strategy: Gold-backed reserves encourage global trade settlements in yuan.

Economic Insurance: Gold provides a safeguard against domestic economic slowdown.

Global Trend: Central banks worldwide — from Turkey to India — are boosting gold reserves.

The dual play

China’s approach is a dual financial strategy — a weaker yuan to aid exports and liquidity, balanced by rising gold reserves to hedge financial risks. This dual policy strengthens Beijing’s resilience and signals its slow pivot away from Western-dominated financial systems.

With the U.S. fiscal deficit widening, the dollar weakening, and global central banks rushing to diversify, gold’s long-term trajectory appears robust. For Indian investors, this could mean a steep surge in domestic gold prices, magnified by currency effects.

As A K Mandhan summed up, “China’s playbook is clear — weaken the yuan, stockpile gold, and prepare for the next phase of global finance. If the trend continues, Rs 1,77,000 per 10 grams isn’t far-fetched — it’s inevitable.”