Exploring the Economic and Geopolitical Factors Driving China’s Growing Gold Demand

Gold Demand Surges in China

MARY LOUISE KELLY, HOST:

Gold sparkled this spring. The price of the precious yellow metal jumped as much as 22% between mid-February and mid-May. One of the big drivers was demand from China, and NPR’s John Ruwitch decided to find out why.

Insight: Economic Uncertainty

As per Joshua Rotbart, a Hong Kong-based precious metals trader, the surge in gold purchases in China can be attributed to the prevailing sentiment of fear and concern among the populace. With economic indicators like a struggling economy, underperforming stock market, and depreciating currency, Chinese investors view gold as a reliable asset to maintain value during turbulent times.

Central Bank’s Role

China’s central bank also significantly contributed to the spike in gold demand by adding 316 tons to its gold reserves over 18 months. This move not only serves as a strategic investment but also aligns with the bank’s objective to diversify its foreign exchange reserves away from dollar-denominated assets.

Market Predictions

Despite a recent cooling in buying activity and a slight decrease in gold prices, industry experts like Xing Zhaopeng and Nikos Kavalis foresee a potential rebound, with projections of gold hitting new highs by the end of the year. This optimism is fueled by ongoing geopolitical tensions globally and anticipated interest rate cuts in the United States.

Consumer Behavior

For many Chinese consumers, like newlyweds Niu Tianwen and Jin Shan, investing in gold jewelry serves both sentimental and practical purposes. While not viewed explicitly as an investment, the choice to prioritize gold over other luxury items reflects a broader trend of seeking stable value storage in uncertain economic climates.

John Ruwitch, NPR News, Beijing.