Did China’s money printer light the fuse under gold?
As precious metals prices have surged in recent months, some analysts are pointing to a possible link between the rally and a sharp expansion in China’s monetary stimulus — the largest increase outside the pandemic era.
Citing Bloomberg data, macro analyst Otavio Costa noted that China’s money supply recorded its steepest annual increase outside the Covid period, with roughly $4.5 trillion added over the past year.
This is wild.
undefined Otavio (Tavi) Costa (@TaviCosta) December 31, 2025
China’s money supply just recorded its largest annual increase on record, excluding the post-COVID stimulus period.
That amounts to roughly $4.5 trillion added in a single year — more than the Federal Reserve’s entire holdings of US Treasuries on its balance… pic.twitter.com/KDfSCnuD8m
The scale of the expansion suggests more than routine policy support. Instead, it signals that policymakers, led by the People's Bank of China (PBOC), are aggressively countering deflationary pressures, weak domestic demand, stress in the property sector, and slowing global trade simultaneously.
For comparison, the amount of liquidity added exceeds the value of U.S. Treasury securities held outright by the Federal Reserve on its balance sheet.
“No wonder metals have been moving as much as they have recently,” Costa said.
China is already the world’s largest buyer of physical metals, including the biggest consumer of gold and a major player in silver, platinum, and copper markets.
When domestic liquidity expands at this pace, retail buying, institutional hedging, and central bank accumulation often rise in tandem, creating physical tightness rather than purely speculative price moves.
That dynamic may already be playing out. The People’s Bank of China recently reported its 13th consecutive monthly gold purchase, lifting total gold reserves to 2,305 metric tonnes, according to data from the World Gold Council.
Precious metals rally in 2025: One for the ages
2025 proved to be a historic year for precious and industrial metals, led by a powerful rally in gold that sent prices above $4,500 a troy ounce for the first time.
The surge was driven by persistent inflation concerns, slowing global growth, and continued aggressive accumulation by central banks, particularly those seeking to diversify away from the U.S. dollar.
Silver also joined the rally, breaking through $80 an ounce for the first time on record. Prices pulled back sharply toward the end of December, though analysts cautioned against overinterpreting the late-year swings.
“Don’t read too much into massive moves,” Michael Haigh, head of commodities research at Societe Generale, told Bloomberg, noting that year-end trading conditions in metals markets are often “so illiquid.”
Others pointed to deeper structural forces underpinning the rally. Brendan Fagan, a macro strategist at Bloomberg Markets Live, highlighted China’s role in tightening physical supply.
“Silver’s dizzying rally and equally violent pullback are keeping focus on a physical market that remains under acute strain, and China has emerged as a central pressure point heading into the new year,” Fagan said.