Why is China investing massively in gold?

This is an observation many investors may have made in recent months: the price of gold is breaking global records. Despite the slight decline seen in recent days, the precious metal is currently trading at close to €2,150 per ounce, which is very high.

China is investing in gold more than ever

This enthusiasm can be explained by China in particular, as explained New York Times in a fascinating article. Thus, individuals tend to bet on this asset because they no longer trust traditional investments such as real estate or buying shares. The latter two experienced successive crises in the Middle Kingdom.

Ross Norman, CEO of MetalsDaily.com, a London-based precious metals information platform, quoted by our colleagues, points out in this regard: “China is undoubtedly raising the price of gold. The flow of gold to China has changed from a fixed flow to an absolute flow”.

This follows from the data of the prestigious daily. According to the China Gold Association, the country’s gold consumption increased by 6% during the first quarter compared to the first three months of 2023. Last year it was a 9% increase.

In addition to individuals, China’s central bank plays a role in this madness. The financial institution thus increased its gold reserves for the 17th month in a row. In 2023, it bought more gold than it had in the last fifty years.

Why ? The aim is to reduce its dependence on the US dollar. In addition, Beijing is gradually reducing its holdings of Uncle Sam Treasuries As of March 2024, US debt was $775 billion, down from $1.1 trillion in 2021.

What can we expect next?

These various factors combined end up weighing heavily on the gold market and therefore have a global impact. So much so that experts have a hard time predicting what tomorrow will bring and whether the price will rise or fall again.

In normal times, gold is a safe haven that tends to decline when economic and geopolitical crises subside. While inflation is falling, the craze for gold is unabated, shaking many certainties on the subject.

What you need to remember:

  • China is one of the major players in gold investment
  • This takes place at the level of individuals and the central bank
  • This development is changing the cards on a global level

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