Secret China Trading Is Fueling Recent Gold Rallies

My expectations are being fully confirmed as Chinese gold trading activity and prices both surge—and now even Bloomberg has taken notice with a fascinating article on what’s unfolding.

Since last fall, I’ve been advancing a theory that China’s aggressive futures traders—who were behind gold’s initial $400 breakout one year ago that launched this bull market—would soon reassert themselves and help drive gold from around $2,500 to $3,000 and beyond. 

Sure enough, I’m pleased to report that my thesis is unfolding exactly as anticipated—evidenced by a surge in gold futures trading volume on the Shanghai Futures Exchange (SHFE), a renewed rise in Chinese domestic gold premiums over international spot prices, and gold now entering its parabolic, nearly vertical phase.

Now, the mainstream media is finally catching on. Bloomberg just published a piece today titled “Gold-Trading Frenzy Erupts in China as Tensions With US Escalate,” confirming that a full-blown Chinese gold boom is underway as investors flock to safety amid a brewing trade war between the world’s two largest economies.

The Bloomberg article includes some fascinating commentary and charts that I want to share with you—starting with insights from Bloomberg’s Chinese sources, who explained the key reasons behind the surge in gold demand among Chinese investors:

“Investors continue to favor gold as a safe-haven asset and long-term portfolio diversifier, as domestic bonds and equities come under pressure,” Zijie Wu, a Shenzhen-based analyst at Jinrui Futures said. “I expect investment and hedging demand in China to remain resilient” as policy flip-flops in the US create more uncertainty, he added.

“China may be encouraged to continue moving forward more actively to diversify its reserves away from the US dollar and treasuries given that it is at the epicenter of the trade war,” said Vasu Menon, managing director of investment strategy at Oversea-Chinese Banking Corp. The desire to reduce exposure to the US may see China “buying more gold to bolster its reserve,” Menon said.

The first chart in the Bloomberg article highlights the surge in gold futures trading volume on the SHFE:

The Shanghai Futures Exchange saw trading volumes of the precious metal hit the highest level in a year last week. That was thanks to investors and industry players — refineries, traders, and retailers — that have ramped up hedging activities as global markets gyrate in response to trade policy changes in the US and China.

The second chart in the article shows a sharp spike in China’s domestic gold premiums—a telltale sign of surging investor demand and booming sentiment among Chinese gold buyers:

The buying frenzy in China has seen prices move to a premium of around $20 an ounce over international prices, reversing a discount it saw for the majority of the past year when domestic demand was weak, according to Bloomberg calculations.

The country’s central bank added around 2.8 tons in March, the fifth monthly addition in a row, and heightened global tensions may spur more bullion purchases. In 2019, the People’s Bank of China added more than 100 tons of gold in reserves after relations with the US worsened during US President Donald Trump’s first term.

The third chart reveals that inflows into gold bullion-backed exchange-traded funds (ETFs) in China have surged recently, highlighting them as a major source of demand and a key driver behind gold’s rising price:

Bullion-backed exchange-traded funds have also become a popular investment option in a market that traditionally favors physical holdings. Inflows to onshore ETFs, driven by retail investors, have set new records week after week. Last week’s flow topped 12.4 billion yuan ($1.7 billion), almost doubling the previous week’s peak.

Much of the onshore strength comes from the demand for investment bars, inflows to ETFs, and banks’ gold accumulation plans - an investment product that allows retail investors to accumulate gold on a regular basis, said Zijie Wu, a Shenzhen-based analyst at Jinrui Futures Co.

Anyway, the Chinese gold mania I’ve been forecasting and writing about for the past seven months is now playing out exactly as I expected—and I have to say, I love it when a plan comes together. 

This emerging frenzy out of China is a major driver behind gold’s recent transition from a steady climb to a full-blown parabolic rally.

And here’s the exciting part: this parabolic phase is likely only just beginning. When markets catch fire like this, the upside can be fast, furious, and shocking—especially as more investors pile in and momentum takes over. 

That’s one of the key reasons why Goldman Sachs’ recent bullish gold forecast of $3,880 by year-end 2025 could very well become a reality. One thing’s for sure: things are about to get very interesting, and I’m thrilled to be heavily positioned in gold right now.

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