As gold rose to its highest price in history this year, Xena Lin joined the frenzy by making monthly purchases of “golden beans, pebble-like pieces of precious metal.
For Lin, a 25-year-old white-collar worker in southern China, the $80 beans — small enough to rest on the tip of a finger — were an affordable way to participate in the excitement of gold without splurging on jewelry, bars, or gold coins. She said buying gold, particularly in this fun way, inspired her to continue investing.
“I continue to work hard to save more,” Lin said.
Often considered a safe investment in times of geopolitical and economic distress, gold has soared in price in response to the Russian invasion of Ukraine and the war in Gaza. But gold’s rise to highs above $74 per gram has proven more resilient and lasted longer thanks to China. Chinese consumers have flocked to gold as their confidence in traditional investments such as real estate and stocks has faltered.
And it continued to scale new heights despite factors that traditionally make gold a comparatively less attractive investment: higher interest rates and a strong US dollar.
There is a growing feeling that the gold market It is no longer governed by economic factors, but by the whims of Chinese buyers and investors.
“China is undoubtedly driving the price of gold,” said Ross Norman, CEO of MetalsDaily.com, a gold information platform. precious metals based in London. ““The flow of gold into China has gone from solid to torrent.”
Gold consumption in the country increased 6 percent in the first quarter compared to the previous year, reported the China Gold Association. It followed a 9 percent rise last year.
Another important buyer of gold in China is the country’s central bank. In March, the People’s Bank of China increased its gold reserves for the 17th consecutive month. Last year, the bank bought more gold than any other central bank in the world, adding more to its reserves than it had done in almost 50 years.
Beijing is buying gold to diversify its reserve funds and reduce its dependence on the US dollar, long considered the most important currency to hold in reserve. China has been reducing its US Treasury holdings for more than a decade. In March, China had about $775 billion of US debt, up from about $1.1 billion in 2021.
The combination of aggressive retail buying by Chinese consumers and purchases by central banks has sparked the interest of speculators in Shanghai markets, who are betting that this trend will continue.
Average gold trading volume on the Shanghai Futures Exchange more than doubled in April from a year earlier.
Kelly Zhong, a teacher in Beijing, started buying gold in 2020, at the beginning of the pandemic. She has accumulated more than 900 grams of gold bullion, but has also invested in the metal via exchange-traded funds.
Zhong said he was inspired by an old saying: “Jade in prosperous times, gold in difficult times.”
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