Macro Watch: The gold price in China has been increasing ever since 2007, when the government allowed for the precious metal’s free trade by individuals as an investment good. In recent years, however, the price has been pushed up by numerous domestic and foreign factors. Undoubtedly, the economic growth enjoyed by the country is one of the major reasons for investor interest in the precious metal. To this could be added the recently increasing inflation, forcing investors to look for non-monetary means of saving their income, and the weak dollar, becoming less and less attractive as a foreign exchange reserve currency.
Gold Price in China Follows Local Demand Increase
Chart provided by: CEIC Data
In addition, the Chinese government has come to a conclusion that the reserves, held in gold and equal to about 33 million ounces (about 1,000 tons), do not provide enough security for the country. Compared to the United States, with gold reserves of about 280 million ounces (more than 8,000 tons), the Chinese government has serious cause to opt for increasing the country’s gold positions. With plans to increase reserves fivefold in upcoming years, the government will undoubtedly put serious pressures on the gold market in China and will almost certainly cause the price of the precious metal to rise further.
By Ivan Enchev in Bulgaria – CEIC Analyst