Given the scarcity of investment options in China due to capital controls, the Chinese public is likely to continue investing in gold and supporting its price.
Jan Nieuwenhuijs, an expert gold market analyst, examined the current situation of the gold market. In his report, he highlights that growing demand from both the private sector and the People’s Bank of China (PBOC) plays a key role in the rise in gold prices. During the first quarter, Chinese private investors acquired 543 tonswhile the PBOC added 189 tons to its reserves.
Although the price of gold fell to one-week lows this Thursday, and was down for the third consecutive session, due to profit-taking after the minutes of the most recent meeting of the United States Federal Reserve indicated that interest rates Interest rates would remain higher for longer. The spot metal falls 0.5%, to US$2,367.56 per ounce, after having hit its lowest since May 15 at US$2,354.79 at the beginning of the session.
China’s influence on the gold market is decisive in maintaining and supporting current price levels, according to Nieuwenhuijs’ analysis. The strategist notes that demand from private investors and the PBOC is responsible for driving gold to historic levels last week.
Gold and Chinese demand
Private demand from Chinese investors has seen a notable increase, importing 543 tons during the first quarter, representing an increase of 74% compared to the last quarter of 2023. In addition, the PBOC also increased its total purchases during the same period, reaching 189 tons, 38% more than the previous quarter..
Nieuwenhuijs predicts that the gold market will remain active, as current levels of demand for the precious metal will be maintained or increased. He highlights that the recent sale of US Treasuries and agency bonds worth $53 billion during the same period indicates that China is exchanging dollars for gold.
gold
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Furthermore, he notes that this behavior will further intensify as both Russia and the Western world begin to freeze and confiscate each other’s reserves on international soil, emphasizing gold as a safe haven against fiat. The decline in traditional investment options in China, such as real estate and stocks, will also likely increase demand for gold as an alternative investment vehicle.
Given the scarcity of investment options in China due to capital controls, the Chinese public is likely to continue investing in gold and supporting its price.
Recently, the analyst stated that we are in the early stages of a multi-year gold bull market that could see prices of the precious metal reach $8,000 per ounce within the next 10 years.
Source: Ambito
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