China is at the forefront of gold’s historic surge
Gold reaching record highs above $2,400 per ounce in 2021 has grabbed the attention of markets worldwide. China, the top producer and consumer of this valuable metal, is playing a key role in this remarkable surge.
The investment appeal of gold is being enhanced by escalating geopolitical tensions, such as conflicts in the Middle East and Ukraine, as well as the possibility of reduced US interest rates. However, what truly fuels the surge in gold prices is the unwavering demand from China. Whether it’s individual shoppers, fund investors, futures traders, or even the central bank, everyone is turning to gold as a reliable asset during these uncertain times.
Biggest Buyer
China and India have always competed for the title of the world’s largest buyer. However, things changed last year when China’s appetite for jewelry, bars, and coins reached unprecedented levels. China’s demand for gold jewelry increased by 10%, whereas India’s demand decreased by 6%. On the other hand, Chinese investments in gold bars and coins skyrocketed by 28%.
Imports Jump
China produces the most gold globally, but it continues to import significant amounts, with the numbers increasing. Over the past couple of years, the country has imported over 2,800 tons, surpassing the total metal held by exchange-traded funds worldwide and representing about a third of the US Federal Reserve’s stockpiles.
Central Bank
The People’s Bank of China has been purchasing gold for 17 consecutive months, marking its longest buying streak ever. This move is part of the bank’s strategy to diversify its reserves and protect against currency depreciation. Among central banks, it stands out as the most enthusiastic buyer of gold. In 2024, it is anticipated that the official sector will continue to maintain high levels of gold purchases.
Shanghai Premium
Chinese consumers continue to show a strong interest in gold, even with high prices and a devalued yuan. This is evident in the fact that buyers in China frequently pay more than the international market price for gold. At the beginning of this month, the premium reached $89 per ounce, significantly higher than the average premium of $35 over the past year and the historical average of $7.