China STOCKPILING gold as Chinese investors and consumers remain cautious of real estate and stocks
The current global price of gold has reached its highest levels. At the same time, Chinese investors and consumers remain cautious about real estate and stocks as they stockpile gold at a record pace.
Gold is considered by many as a safe investment during times of geopolitical and economic unrest. Recently, gold prices have skyrocketed in response to the conflicts in Ukraine and Israel and Palestine. However, gold’s steady climb to highs above $2,400 per ounce has proved more resilient and lasted longer thanks to one country: China.
Many Chinese consumers have favored gold as their trust in traditional investments like real estate or stocks has wavered. Additionally, China’s central bank has continued to add to its gold reserves, at the same time slowly reducing its holdings of American debt.
Chinese speculators are also betting that there is still room for appreciation.
As the price of gold surged this year to its highest ever, Xena Lin made monthly purchases of gold “beans,” the term for small morsels of the precious metal. These small pieces of gold are tiny enough to rest on a fingertip and weigh an estimated one-thirtieth of an ounce.
Lin, a 25-year-old administrative worker in southern China, thinks the $80 gold beans are an affordable way to buy into the gold excitement without spending too much on coins, jewelry or gold bars.
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China’s influence in gold markets has become more pronounced
China has continued to hold considerable influence in gold markets. China’s influence has become even more prominent amid this latest bull run, with data suggesting an estimated 50 percent increase in the global price of gold since late 2022.
It continued to reach new heights despite factors that traditionally make gold a comparatively less appealing investment, such as higher interest rates and a strong United States dollar.
In April, gold prices soared higher after the Federal Reserve signaled that it would keep higher interest rates longer. The precious metal has continued to appreciate even as the dollar has risen against almost every major currency in the world by 2024.
While prices have pulled back to at least $2,300 per ounce, there is a growing sentiment that the gold market is no longer controlled by economic factors but by the actions of Chinese buyers and investors.
Ross Norman, chief executive of Metals Daily, a precious-metals information platform in London, explained that it is clear that China is “driving the price of gold.” He added that the flow of gold to the country “has gone from solid to an absolute torrent.”
In China, gold consumption has increased by six percent in the first quarter from a year earlier, reported the China Gold Association. This followed a nine percent increase last year.
Investor confidence in China’s stock markets has not fully returned. Several big investment funds aimed at the wealthy were also unsuccessful amid failed bets on real estate.
China’s central bank is also a major buyer of gold
China’s central bank is also another major buyer of gold. In March, the People’s Bank of China added to its gold reserves for the 17th straight month. And last month, the bank bought more gold compared to other central banks globally, adding more to its reserves than it had in at least 50 years.
Beijing is buying up gold to diversify its reserve funds and gradually decrease its dependence on the U.S. dollar, which has long been thought of as the most important currency to hold in reserve.
China and other central banks are starting to acquire gold after the U.S. Treasury Department finalized the rare act of freezing Russia’s dollar holdings under sanctions imposed on Moscow. Other American allies also enforced similar restrictions on their currencies.
The combination of aggressive retail buying from Chinese consumers and central bank purchases has attracted the interest of speculators on markets in Shanghai who expect this trend to continue. The average trading volume for gold on the Shanghai Futures Exchange more than doubled last April from a year earlier.
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