According to the gold market and geopolitical analysts, China is contributing to the global rise of gold prices fueled by a crisis in its internal investment apparatus and geopolitical factors. Ross Norman, chief executive of MetalsDaily.com, a London-based precious metals platform, believes China has a pivotal role in the recent bull run that took gold prices up to $2,500 per ounce.

In remarks given to The New York Times, Norman stated:

China is unquestionably driving the price of gold. The flow of gold to China has gone from solid to an absolute torrent.

Part of the increase in demand has to do with the demise of the Chinese real estate sector, which has caused investors to seek alternative options to allocate their funding. The internal gold demand rose 6% during Q1 2024 compared to Q1 2023. This number increased by 9% last year, indicating the demand has maintained.

In addition, the continued demand from the People’s Bank of China (PBOC), which has a streak of 17 months increasing its gold reserves, has also contributed to the appreciation of the precious metal. According to Guan Tao, global chief economist at BOC International in Beijing, the impending risk of U.S. sanctions has contributed to the behavior of the PBOC.

Tao explained that China now uses foreign currency to purchase gold, increasing its gold holdings and reducing its U.S. dollar holdings simultaneously. Before, China paid for gold domestically in Chinese yuan.

“We can see this wave of gold’s rise may be different from the past,” Tao stressed, given that it obeys factors that have not been traditionally linked to gold’s price rise.

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