Gold Fever Rips Through China as Trump’s Trade War Raises Stakes
Gold’s record-setting rally is making ever-larger waves in China by stoking retail demand, fanning unprecedented volumes, feeding volatility, and drawing warnings from the authorities.
As prices gyrate, there have been signs of a ferocious spike in day-trading, and record moves in yuan-priced futures with traders navigating trade-war twists. Flows into exchange-traded funds, meanwhile, have surged, retail activity has ballooned, and local premiums gapped out. Asia’s largest economy — and the main target of President Donald Trump’s ire — has plenty of clout as it’s the largest gold consumer, as well as being a leading producer.
“The bull market in gold will last for a long time because the Chinese want to hedge against geopolitical tensions,” said Samson Li, a Hong Kong-based analyst at Commodity Discovery Fund, who noted that some forecasts suggested a rally to $5,000 an ounce, including a long-run prediction from China International Capital Corp., the country’s oldest investment bank.
Investors “all know that the Chinese economy is quite poor — and with the US tariffs, it’s likely to get worse,” he said.
Gold has been this year’s best-performing major commodity as the Trump administration’s aggressive bid to rework the global trade order has rocked markets, feeding haven demand at a time when central banks had already been big buyers, including the People’s Bank of China. That narrative has struck a broad local chord, as authorities have been been struggling to turn the economy around. There are especial concerns about a potentially weaker yuan.
“Local media coverage of gold has amplified the fear-and-greed sentiment,” said Wu Zijie, an analyst at Jinrui Futures Co. There’s a fear of missing out, and despite a brief mid-week selloff, most retail investors merely eased off the pedal, without truly exiting, according to Wu.
In a country in which gold has been venerated as a traditional household investment down the ages, there are clear signs of an emerging retail frenzy, echoing — and exceeding — a pattern that was seen at times last year. Trading volumes on the Shanghai Futures Exchange have been far above 1 million contracts a day in each of the past three sessions, dwarfing typical flows.
“For all the massive increase in trading volumes that we’ve seen, we haven’t seen much of an increase in open interest — so that tells me that this is day traders,” said John Reade, chief market strategist at the producer-funded World Gold Council, who added that Chinese investors played a role in driving global prices to an all-time high earlier this week.
“We’ve also been hearing lots of reports of banks selling out of investment bars and things like that,” Reade said. “So it’s undoubtedly strong retail investment demand taking place.”
In addition to speculative activity in futures, investors are also hoovering up other types of gold. Inflows to local, gold-backed ETFs this month have surpassed the total amount of holdings added last year. Amid the fervor, the premium of Shanghai gold over global rates has widened to a record.
The backdrop to the heady trading in China is a growing consensus that gold’s rally likely has further to run even after stellar gains. Among bulls, Goldman Sachs Group Inc. has forecast there’s scope for prices to hit $4,000 an ounce in mid-2026. It was last at about $3,360.
In China, the mood has been febrile. A wave of posts across social media, including on WeChat, encourage retail investors with little-to-no investing experience to jump into the fray. Some users have posted about putting their life savings into gold, or taking out loans to chase higher prices.
As is often the case during periods of market upheaval — particularly in the nation’s often chaotic commodity markets — the authorities have moved to cool the temperature. On Monday, the Shanghai Gold Exchange issued a fresh warning on volatility, urging investors to stay cautious.
The next day, prices peaked, then plunged.“No matter what Trump says, at least here in China, we just don’t believe that the relationship can be mended,” said Li at Commodity Discovery Fund. “This is the kind of sentiment in the Chinese population right now. They’re ready to burn the bridge.”
Source: Bloomberg
