China and UK dump Treasuries amidst a strong gold market

Gold's unstoppable rally continues to break records in 2025, with prices surging to a fresh all-time high of $2,954.69 per ounce, marking its tenth record this year amid a remarkable 12% year-to-date gain. This precious metal's ascent comes against a backdrop of significant shifts in global financial markets, where major central banks are strategically repositioning their reserves. China's latest moves are particularly telling - adding approximately 10 tons of gold to its holdings while simultaneously reducing its U.S. Treasury exposure by $9.6 billion to $759 billion, its lowest level since 2009. These market dynamics are unfolding amid broader economic tensions, including U.S. threats of new tariffs on key industries and a substantial Treasury selloff reaching $81 billion in December alone, while the Federal Reserve maintains its aggressive $60 billion monthly balance sheet reduction. As these forces converge, they paint a compelling picture of why gold continues to capture investors' attention in an increasingly complex global financial landscape.

Central Banks Shift Away from Dollar Assets as Gold Glitters

In a significant move highlighting the changing dynamics of global reserves, central banks continue their strategic pivot toward precious metals while reducing exposure to traditional dollar-denominated assets. China's latest actions exemplify this trend, with the nation adding approximately 10 tons of gold to its reserves in December 2023, bringing its total holdings to an impressive 2,280 tons.

This accumulation of gold reserves comes alongside a notable reduction in China's U.S. Treasury holdings, which decreased by $9.6 billion to reach $759 billion - marking their lowest level since 2009. This dual-pronged approach suggests a deliberate diversification strategy by one of the world's largest economies.

The broader market context makes these moves particularly significant, as gold continues its remarkable performance, reaching its tenth record high of 2024 at $2,954.69 per ounce. With year-to-date gains of 12%, gold's appeal as a reserve asset appears to be strengthening amid global economic uncertainties.

This shift away from U.S. Treasuries isn't isolated to China alone. A major Treasury selloff has seen China, Japan, and the UK collectively reduce their holdings by $81 billion in December. Against the backdrop of rising U.S. 10-year Treasury yields hovering around 4.5% and the Federal Reserve's ongoing $60 billion monthly Treasury reduction program, these movements suggest a broader realignment of central bank reserve strategies.

Treasury Turbulence Fuels Gold's Record Rally

The precious metals market is experiencing a perfect storm of fundamental drivers, propelled by significant shifts in global Treasury holdings and mounting trade tensions. Gold's meteoric rise to a new record of $2,954.69 per ounce reflects growing concerns about traditional safe-haven assets, particularly US Treasuries, which are facing unprecedented selling pressure from major international holders.

In a remarkable development, December saw China, Japan, and the UK orchestrate a combined selloff of $81 billion in US Treasuries, with China reducing its holdings to $759 billion - the lowest level since 2009. This massive liquidation coincides with the Federal Reserve's continued monetary tightening through its $60 billion monthly Treasury reduction program, creating additional pressure on government debt markets.

The situation is further complicated by escalating trade tensions, as the US contemplates new tariffs on critical sectors including lumber, automobiles, semiconductors, and pharmaceuticals. This potential trade friction adds another layer of uncertainty to already volatile markets, encouraging investors to seek alternative safe-haven assets.

Despite Treasury yields hovering around an attractive 4.5%, institutional investors appear increasingly drawn to gold's stability and potential upside. The precious metal's 12% year-to-date gain and series of record highs - marking its tenth peak in 2024 alone - underscore this shifting sentiment. China's strategic approach is particularly telling, as it simultaneously reduced Treasury exposure while adding approximately 10 tons of gold to its reserves in December 2023, bringing its total holdings to 2,280 tons.

Technical indicators support this bullish narrative, with the 50-day Exponential Moving Average (EMA) providing robust support while stochastic indicators remain positive. Though overbought conditions exist, the market maintains strong upward momentum, suggesting the psychological $3,000 level could be within reach.

Technical Signals Point to Sustained Precious Metals Momentum

The precious metals market continues to demonstrate remarkable strength, with gold's technical indicators painting a compelling picture of sustained upward momentum. The metal's recent surge to a historic peak of $2,954.69 per ounce marks its tenth record high of 2024, supported by robust technical foundations that suggest further gains may be possible.

A critical technical factor underpinning gold's impressive 12% year-to-date advance has been the consistent support provided by the 50-day Exponential Moving Average (EMA50). This technical backbone has acted as a reliable floor, preventing significant drawdowns even as prices push into unprecedented territory. While overbought conditions are present in current market readings, the positive stochastic indicators continue to signal strength rather than exhaustion.

The currency markets are providing additional context for gold's movements, with the USD/JPY pair constrained within a defined range of 149.65-151.05, and the GBP/USD maintaining positions above the key 1.2605 level. These currency dynamics, coupled with broader market fundamentals including China's strategic accumulation of gold reserves to 2,280 tons by end-2023, are creating a supportive environment for precious metals.

Looking ahead, market participants are increasingly focused on the psychological $3,000 per ounce level as the next potential milestone. This target appears more achievable given the current technical setup, despite the extended nature of the recent rally. The market's ability to maintain momentum in overbought conditions speaks to the robust underlying demand dynamics driving this historic bull run.

Conclusion

The precious metals market is experiencing a remarkable confluence of factors driving gold to unprecedented heights, as evidenced by its tenth record of 2024 at $2,954.69/oz and impressive 12% year-to-date gains. This momentum is fundamentally supported by significant central bank activities, particularly China's strategic moves to add 10 tons of gold while simultaneously reducing US Treasury holdings by $9.6B to $759B.

The broader market context, characterized by potential US tariff threats and a substantial $81B Treasury selloff by major holders, has created an environment where gold's safe-haven appeal is magnified. Technical indicators remain supportive, with the EMA50 providing a solid foundation despite overbought conditions, while currency market movements in USD/JPY (149.65-151.05) and GBP/USD (above 1.2605) reflect the complex interplay of global monetary dynamics.

This combination of strong price action, strategic central bank positioning, supportive technical factors, and ongoing global economic uncertainties suggests that gold's trajectory toward the psychological $3,000 level remains well-supported by both fundamental and technical factors. The market's resilience amid the Fed's continued $60B monthly Treasury reduction and elevated yields around 4.5% further underscores gold's current strength as a preferred store of value.