How much of a role did China play in the record rise in gold prices?
According to data recently released by the World Gold Council, as China actively increases its gold reserves, global gold prices will reach the highest level in history in April 2024. In the first quarter of this year, the gold reserves of the People's Bank of China (Central Bank of China) increased by 27 tons, and has been increasing its gold holdings for 17 consecutive months.
After the price of gold surpassed a record $2,400 per ounce, it sparked widespread discussion about price drivers. MetalsDaily.com's Ross Norman explained China's key role in gold's rise in an interview with the Investing News Network.
He pointed out, first, that the key support behind a stable gold price of 2,050 US dollars or 2,100 US dollars per ounce is high-quality purchases from central banks. The reason for this is a high-quality purchase, because central bank purchases are generally long-term, and it is unlikely that these gold assets will be sold during price pullbacks, including the Central Bank of China.
At the same time, ordinary Chinese consumers have a soft spot for gold, and institutional purchases of exchange-traded funds are also strong. China's Gen Z and millennials are flocking to buy gold, even buying gold products at higher premiums, such as the “Save Gold Beans” craze on Chinese social media.
Norman said that earlier this year, all of these factors were in place, but that changed when gold prices began to take off on March 1. Heavy players have emerged in the gold market and are driving the market up sharply. Norman deduced that it can basically be determined that the buying came from speculators on the Shanghai futures Exchange (SHFE).
In fact, after the price of gold broke through an all-time high of 2,430 US dollars per ounce, exchanges, especially the China Exchange, the Shanghai Gold Exchange, and the Shanghai futures Exchange, drastically raised the initial margin, which actually set a deceleration zone for gold trading. Since then, the interest of Chinese traders in gold has waned, and the price of gold has begun to fall.
Norman believes that gold has risen sharply to around $2,100, driven by high-quality purchases. The final increase of $200 on this basis can be considered weak because it was driven by speculative futures buying.
However, Citigroup and Bank of America analysts expect the price of gold to reach 3,000 US dollars per troy ounce within 6 to 18 months, given the support of other favorable factors such as the Federal Reserve's imminent start of interest rate cuts and geopolitical conflicts.
After the price of gold surpassed a record $2,400 per ounce, it sparked widespread discussion about price drivers. MetalsDaily.com's Ross Norman explained China's key role in gold's rise in an interview with the Investing News Network.
He pointed out, first, that the key support behind a stable gold price of 2,050 US dollars or 2,100 US dollars per ounce is high-quality purchases from central banks. The reason for this is a high-quality purchase, because central bank purchases are generally long-term, and it is unlikely that these gold assets will be sold during price pullbacks, including the Central Bank of China.
At the same time, ordinary Chinese consumers have a soft spot for gold, and institutional purchases of exchange-traded funds are also strong. China's Gen Z and millennials are flocking to buy gold, even buying gold products at higher premiums, such as the “Save Gold Beans” craze on Chinese social media.
Norman said that earlier this year, all of these factors were in place, but that changed when gold prices began to take off on March 1. Heavy players have emerged in the gold market and are driving the market up sharply. Norman deduced that it can basically be determined that the buying came from speculators on the Shanghai futures Exchange (SHFE).
In fact, after the price of gold broke through an all-time high of 2,430 US dollars per ounce, exchanges, especially the China Exchange, the Shanghai Gold Exchange, and the Shanghai futures Exchange, drastically raised the initial margin, which actually set a deceleration zone for gold trading. Since then, the interest of Chinese traders in gold has waned, and the price of gold has begun to fall.
Norman believes that gold has risen sharply to around $2,100, driven by high-quality purchases. The final increase of $200 on this basis can be considered weak because it was driven by speculative futures buying.
However, Citigroup and Bank of America analysts expect the price of gold to reach 3,000 US dollars per troy ounce within 6 to 18 months, given the support of other favorable factors such as the Federal Reserve's imminent start of interest rate cuts and geopolitical conflicts.
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