Market Gold Continues to Soar as China’s Thirst for the Precious Metal Goes Against the Trend of Investing in Stocks and Digital Currencies

In the past week, global gold prices have been breaking historical records. According to Western media, the main reason for this is China’s increasing demand for gold, alongside other political and economic uncertainties.

By the end of the trading week, spot gold prices rose to $2,178 per ounce, even reaching $2,194 per ounce at one point, the highest level ever recorded. This marks the fourth consecutive week that the precious metal has set new highs, displaying the “crazy” nature of the global gold market.

From the beginning of the week, gold prices have risen by over 3%. This is the strongest weekly increase since mid-October 2023.

China’s Thirst for Gold

According to Bloomberg, alongside investors’ expectations of the US Federal Reserve’s monetary policy easing impacting the gold market, China is a primary driver behind the surge in gold prices.

The increase in gold prices due to political uncertainties and expectations of policy changes in major economies like the United States and Japan is indisputable. However, Bloomberg emphasizes that the continuous breaking of records despite high interest rates is unusual. It should be noted that gold investments do not yield high returns like other asset classes and are primarily used as a safe haven or for speculation.

Therefore, Bloomberg points out that China’s thirst for gold is the main reason for the current frenzy in gold prices. Despite the high interest rates, while Western investors are selling off gold to shift their investments to other channels such as stocks and digital currencies, the People’s Bank of China (PBOC) and Chinese consumers are increasing their record-breaking reserves.

According to Bloomberg, an unstable economy has led Chinese citizens to move their money away from stocks and real estate towards gold in order to preserve asset values.

“Gold markets are not driven by Western investors but by China. This Asian economy has been driving the gold price up throughout last year and now,” stated Bernard Dahdah, an analyst at Natixis.

Of course, according to many experts, the possibility of the Federal Reserve lowering interest rates has also attracted more attention to the gold market. However, this alone is not enough to continuously push the price of this precious metal to new record highs.

16 Consecutive Months

Similarly, CNBC reports that the PBOC has been continuously buying gold since November 2022, bringing their total reserves up to 2,257 tons, while also increasing their gold reserves for 16 straight months.

“The PBOC’s gold reserves have increased for 16 consecutive months,” said Krishan Gopaul, an analyst at the World Gold Council (WGC), as the PBOC purchased a net 12 tons of gold in February 2024.

Although the current amount of gold purchased only accounts for 4% of the PBOC’s strategic reserves, the likelihood of the institution continuing to accumulate gold is extremely high.

“I believe central banks are increasing their gold purchases and decreasing holdings of other foreign currencies in a polarized and unstable world,” said Ryan McIntyre, Director at Sprott.

According to CNBC, the demand for gold reserves by central banks is believed to be the main factor helping the precious metal maintain its support level of $2,000 over the past few months.

The World Gold Council’s 2023 report, released in January 2024, showed that global gold trading volume reached a record-breaking 4,899 tons. Among them, the amount purchased during the 2022-2023 period by central banks exceeded 1,000 tons.

In particular, the report reveals that the PBOC was the largest buyer of gold in 2024, purchasing 225 tons.

“The year 2023 is the second consecutive year in which central banks have increased their gold purchases to record levels,” admitted Shaokai Fan, a researcher at the WGC.

This surge in gold prices, driven by China’s increasing demand and central banks’ purchases, highlights the growing importance of gold as a strategic asset in today’s uncertain global economic landscape.

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