If gold rose This year, at its highest price ever, Xena Lin joined the frenzy by making monthly purchases of golden “beans,” pebble-like pieces of the precious metal.
For Ms. Lin, a 25-year-old administrative worker in southern China, the $80 beans — small enough to rest on a fingertip and weighing about one-thirtieth of an ounce — were an affordable way to buy into the gold rush without to spend a lot of money. for jewelry, gold bars or coins. She had dabbled in stock investing in the past, but she said buying gold, especially in this fun way, inspired her to continue investing.
“I'm still working hard to save more,” Ms. Lin said.
Often considered a safe investment during times of geopolitical and economic turmoil, the price of gold has soared in response to the Russian invasion of Ukraine and the war in Gaza. But gold's climb to peaks above $2,400 an ounce has proven more resilient and longer-lasting, thanks to China.
Chinese consumers have flocked to gold due to their confidence in traditional investments property or shares has failed. At the same time, the country's central bank has steadily increased its gold reserves while reducing its U.S. debt. And adding fuel to the fire, Chinese speculators are betting that there is still room for appreciation.
China already had significant influence on the gold markets. But the country's influence has become even more apparent during this latest bull run – up nearly 50 percent in global prices since the end of 2022. The country has continued to reach new heights despite factors that traditionally make gold a relatively less attractive investment: higher interest rates and higher interest rates. strong US dollar.
Last month, the price of gold rose even after the Federal Reserve indicated this would happen higher interest rates last longer. And the price has continued to rise, just like the dollar up against almost every major currency in the world this year.
Prices have fallen to around $2,300 an ounce, but there is a growing sense that the gold market is no longer controlled by economics but by the whims of Chinese buyers and investors.
“China is without a doubt driving the price of gold,” said Ross Norman, CEO of MetalsDaily.com, a precious metals information platform based in London. “The flow of gold to China has gone from steady to an absolute flow.”
According to the China Gold Association, gold consumption in the country rose 6 percent in the first quarter from a year earlier. The increase followed a 9 percent increase last year.
Investing in gold became more attractive as traditional investments became weaker. China's real estate sector, the destination for most families' savings, is still in crisis. Investor confidence in the country's stock markets has not yet fully returned. A series of major investment funds aimed at the wealthy collapsed after failed real estate bets.
With few better alternatives, money flowed into Chinese funds that traded in gold, and many young people began collecting beans in small quantities.
Online sellers are aggressively seeking gold beans. On Alibaba's Taobao, one of China's largest e-commerce platforms, a merchant sold gold beans via a livestream – a mix of the Home Shopping Network and Amazon. She said buying beans was “like shopping, but an investment.”
The small beans came in five shapes, including one that looked like a peanut and another that looked like a persimmon. By paying $87 per bean, someone could participate in the gold boom for the price of a hot pot meal, she said.
Kelly Zhong, a teacher in Beijing, started buying gold in 2020, at the start of the pandemic. She has amassed more than £2 worth of gold bars, but she has also invested in the metal through exchange-traded funds. She said she was inspired by an old saying: “Jade in prosperous times, gold in troubled times.”
As she sensed the world becoming more chaotic, Ms. Zhong expanded her stock, betting that the price of gold would only rise. She has stopped buying, but she is not ready to sell yet. She sees no reason for that. The Chinese economy is still struggling, and neither real estate nor equities seem to be a good investment.
“The money has to go somewhere,” she said.
Another major buyer of gold in China is the country's central bank. In March, the People's Bank of China expanded its gold reserves for the seventeenth month in a row. Last year the bank bought more gold than any other central bank in the world, adding more to its reserves than it had in almost 50 years.
Beijing is buying gold to diversify its reserve funds and reduce its dependence on the U.S. dollar, long considered the main currency to hold in reserve. China has been reducing its US government bond holdings for more than a decade. As of March, China had about $775 billion in U.S. debt, down from about $1.1 trillion in 2021.
When China expanded its gold reserves in the past, it bought domestically with renminbi, said Guan Tao, chief global economist at BOC International in Beijing. But this time, he said, the bank is using foreign currencies to buy gold, effectively reducing its exposure to the U.S. dollar and other currencies.
Many central banks, including China, have started acquiring gold after the U.S. Treasury Department took the rare step of freezing Russian dollar holdings under sanctions imposed on Moscow. Other US allies imposed similar restrictions on their currencies.
Mr Guan said the sanctions have shaken the “foundation of confidence in the current international monetary system” and forced central banks to protect their reserves with more diverse assets. “We can see that this wave of gold appreciation could be different than in the past,” he said.
Although Beijing has been buying up gold, the metal only accounts for about 4.6 percent of China's foreign exchange reserves. In percentage terms, India holds almost twice as much of its reserves in gold.
The combination of aggressive retail buying by Chinese consumers and purchases by central banks has piqued the interest of speculators in Shanghai markets, who are betting the trend will continue. The average trading volume for gold on the Shanghai Futures Exchange more than doubled in April compared to a year earlier.
“They swim with the current,” says MetalsDaily's Mr. Norman. “China now dominates the gold market.”
For Ms. Lin, buying golden beans is satisfying, she said, because it feels like frivolous shopping, but she is actually investing her money in something she can touch. She said she would continue to buy more beans.
“The price of gold always goes up and down,” she said. “But the increase is within the range I can tolerate, so I think it's good.”