Gold prices have surged to record highs this year, driven by geopolitical and economic turmoil such as Russia’s invasion of Ukraine and the war in Gaza. For Chinese consumers like Xena Lin in southern China, buying gold “beans” that are small, affordable, and easy to purchase has become a popular way to invest in gold without splurging on jewelry or coins. This has inspired more young people like Ms. Lin to invest in gold as an alternative to traditional investments in real estate or stocks, which have become less appealing in China.
Chinese consumers, as well as the country’s central bank, have been driving the surge in gold prices. China’s influence in the gold market has become more pronounced during this bull run, with a nearly 50 percent increase in global gold prices since late 2022. Despite factors such as higher interest rates and a strong U.S. dollar traditionally making gold a less appealing investment, Chinese buyers and investors have continued to support the rise in gold prices, pushing it to new heights.
Gold investing has become more attractive in China as traditional investments have turned lackluster. The real estate sector remains in crisis, and investor confidence in the stock market has not fully returned. This has led to a flow of money into Chinese funds that trade in gold and a growing trend of young people collecting small quantities of gold. Online merchants are aggressively selling gold beans on platforms like Alibaba, with some comparing buying beans to shopping, but as an investment in the gold boom.
In addition to retail investors, the People’s Bank of China has been adding to its gold reserves for a 17th straight month, aiming to diversify its reserve funds and reduce its dependence on the U.S. dollar. China has been reducing its holdings of U.S. debt for over a decade, and the recent sanctions imposed on Russia by the U.S. have further motivated central banks like China to protect their reserves with more diverse holdings, including gold. This has led to increased trading volumes for gold on the Shanghai Futures Exchange, with speculators betting that this trend will continue.
Despite fluctuations in gold prices, Chinese consumers like Xena Lin see buying gold beans as a satisfying and affordable investment opportunity. Ms. Lin plans to continue buying more gold beans as she sees the price of gold fluctuate within a range that she can bear. With the combination of aggressive retail buying from Chinese consumers and central bank purchases, China’s dominance in the gold market is growing stronger, leading to a surge in gold prices driven by Chinese buyers and investors. This trend is expected to continue as China diversifies its reserve funds and reduces its exposure to the U.S. dollar.
