China’s got a plan, and it involves a mountain of gold and a weaker yuan. The People’s Bank of China (PBOC) has been on a buying spree, adding to its gold reserves for the second straight month in December.

According to official data, the PBOC now holds 73.29 million fine troy ounces of gold, up from 72.96 million in November. This comes after a six-month pause in gold purchases.

The precious metal’s prices shot through the roof last year, thanks to US monetary easing and safe-haven demand, peaking in a record-breaking rally. But the election of Donald Trump gave the dollar a boost, cooling gold’s momentum.

Gold prices steady, but the market is uneasy

Gold’s not cheap, as we all know. The metal is holding near $2,634 an ounce, a slight dip after two days of losses. Traders are watching every move, trying to predict what comes next. The uncertainty around Trump’s trade policies adds to the chaos.

On one side, US Treasury yields are climbing, hitting their highest since May. On the other, the dollar has been taking a hit, falling 0.6% earlier this week. For gold, it’s a tug-of-war—higher yields usually drag it down, but a weaker dollar props it up.

Meanwhile, hedge funds aren’t as bullish as they used to be. Bullish bets on gold have dropped to their lowest point in six months, based on Commodity Futures Trading Commission data. And if that’s not enough to shake things up, Goldman Sachs just delayed its much-hyped prediction that gold would hit $3,000 an ounce.

They’re now calling for mid-2026 instead, thanks to fewer expected Federal Reserve rate cuts. It’s not just gold though. Silver, palladium, and platinum are all in limbo too.

The yuan’s slide: China’s quiet strategy

While stacking gold, China’s also letting its currency take a hit. The yuan broke past 7.3 per dollar in December, its weakest since late 2023. It’s a big deal. The PBOC had been holding the line on the yuan for weeks, keeping it stable despite mounting economic stress.

But this recent slide suggests Beijing is loosening its grip, letting the currency fall to ease growth pressures. The markets reacted fast. The onshore yuan fell as much as 0.3%, hitting 7.3190 before clawing back slightly.

If it drops past 7.3510, the yuan would sink to levels last seen in 2007. The effect is already hitting other currencies. Taiwan’s dollar is at its weakest since 2016, and South Korea’s won isn’t faring much better.

But here’s where it gets interesting. Chinese state banks, usually the PBOC’s go-to defense, briefly stopped selling dollars at the 7.3 mark. This gave traders the green light to push the yuan even lower. The banks later stepped back in around 7.31, showing Beijing isn’t ready to let the currency slide unchecked.

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