Chinese gold craze as the 15% surge in the gold price since the start of the year.

A key driver of this year’s rally in the gold price has been Chinese buying.The premium on the gold price in the Shanghai market has soared recently.(See Chart 2.)And, yesterday, Bloomberg reported that trading in a China-based gold ETF was suspended because of frenzied buying.

Chinese investor interest in gold is not so surprising given that potential investment opportunities in China have narrowed given the downturn in property valuations and plunge in equity prices there over the past couple of years.

Shanghai Gold Price Premium USD per troy oz above the spot price.

As it happens, our hunch that Chinese demand was underpinning much of the 2024 rally in gold prices was vindicated by trade data for January-February, which showed a surge in gold imports.

Chinese demand was underpinning much of the 2024 rally in gold prices was vindicated by trade data for January-February, which showed a surge in gold imports. Admittedly, Chinese retail buyers have historically been quite price sensitive, but we suspect that the lack of investment alternatives may mean that high prices are less of a deterrent for some time yet.