After falling to a low slightly above $3,100 last week, international gold prices staged another strong rebound this week amid escalating geopolitical tensions in the Middle East and the impact of Moody's downgrade of the US's Aaa sovereign credit rating, with overnight prices rebounding above the 3,300 integer mark once again. In response, Adam Gillard, an FICC analyst at Goldman Sachs, believes there is a clear logical support behind this trend: the buying power from China is returning once again. Specifically, gold buying initiated in the Chinese domestic market during the night session of the Shanghai Futures Exchange (SHFE) triggered a follow-up rally in the New York Mercantile Exchange (COMEX) market. The total open interest in COMEX increased by 3% (4% for silver), while the arbitrage spread between the two major markets, SHFE/CMX, widened significantly. Gillard particularly emphasized that despite gold prices having pulled back 8% from their highs, what impressed him was that the scale of gold holdings in China remained stable at a high level. This indicated that, unlike the typical behavior pattern of domestic momentum traders who tend to rush to buy amid continuous price rise and sell amid continuous price decline, the pullback in gold prices did not trigger a massive wave of selling. As shown in the chart below, the open interest in gold futures on the SHFE is now returning to high levels, having once again reached the highest level since Q4 2019. Meanwhile, the overall gold holdings in the Chinese market (ETF + Shanghai Gold Exchange + SHFE) also remain high. Note: Light blue represents gold prices, and dark blue represents overall gold holdings. Previously, Chinese customs data released on Tuesday showed that China's total gold imports last month reached 127.5 mt, hitting an 11-month high. Despite gold prices hitting record highs in April, touching $3,500 per ounce at one point, this import figure still surged 73% from March. Some institutions have suggested that the central bank's move to allocate new import quotas to some commercial banks in April may have been a key factor driving the surge in imports. In response, Goldman Sachs pointed out that China's gold imports (excluding central bank purchases) rebounded to a one-year high in April, likely related to arbitrage activities triggered by the pricing advantage of the Shanghai Gold Exchange over the London Bullion Market Association (LBMA). It is worth noting that despite gold prices remaining high overall, physical gold demand remains strong. This also explains, to some extent, why the premium level of gold prices on the Shanghai Gold Exchange has remained resilient—even as the precious metals market is currently facing a high-price environment. Note: Premium of gold prices on the Shanghai Gold Exchange. In fact, when gold prices surged last month, many market participants noticed the leading role of the Chinese market in the gold bull market. Goldman Sachs said at the time that the new highs and sharp corrections in gold prices over the past month "almost all occurred around the opening of the Chinese market" , and pointed out that the impact of capital flows through the Shanghai Gold Exchange and the Shanghai Futures Exchange on gold price trends was more significant than that of futures and options on the US New York Mercantile Exchange.

International gold prices have repeatedly hit record highs, and the "Lujiazui Financial Salon" closely follows market hot topics. On April 19, the eighth session of the gold-themed event successfully concluded in Lujiazui, Pudong, Shanghai. This session of the salon focused on "Gold Market Investment Layout and the Enhancement of RMB Gold Pricing Power—Opportunities and Challenges in the Global Context." Multiple guests, combining rich theoretical and practical experience, engaged in in-depth discussions and exchanges, offering suggestions for gold market investment and enhancing pricing capabilities. Efforts to diversify the participants in the gold market continue, attracting more institutions at home and abroad. Gold might be one of the best-performing assets in recent years. In 2024, international gold prices rose by over 26%, setting new historical highs 40 times throughout the year. In Q1 2025, gold prices increased by about 18%, with the international spot gold price currently surpassing $3,300 per ounce. In February 2025, the National Financial Regulatory Administration issued the "Notice on Pilot Projects for Insurance Funds Investing in Gold," officially allowing the first batch of ten pilot companies to participate in gold investments. Regulatory authorities are supporting market development and actively promoting the diversification of participants in the gold market. Su Gang, Vice President, Chief Investment Officer, and Financial Director of Taiping Group, stated in his keynote speech that insurance funds investing in gold is of great significance. On one hand, it optimizes asset allocation structures, increases portfolio liquidity, diversifies portfolio risks, and enhances overall portfolio risk-adjusted returns. On the other hand, insurance funds participating in gold investments help bring more medium and long-term funds to the gold market, strengthening the RMB gold pricing power. Based on practical experience, Su Gang suggested timely opening of gold inquiry forwards and gold futures investment qualifications to better hedge risks, reduce price volatility risks, and better meet the absolute return requirements of insurance companies. Additionally, since insurance institutions invest in gold for medium and long-term asset allocation purposes and mainly hold long positions with long holding periods, they face high storage costs. Su Gang recommended moderately reducing the storage fees of the Shanghai Gold Exchange's custody vaults. Insurance institutions should also organize more peer exchanges and investment training activities to improve gold investment research capabilities. Xu Huizhu, General Manager of the Investor Education and Market Promotion Department of the Shanghai Gold Exchange, pointed out that the pilot project for insurance funds investing in gold not only helps optimize the asset allocation structure of insurance funds but also better leverages the linkage between the opening of the gold market and the development of the insurance industry. It has positive significance for enhancing the agglomeration of the RMB gold market, improving the pricing function of the RMB gold market, and boosting the level of Shanghai as an international financial center. Based on experience in gold market construction, Xu Huizhu stated that domestic gold exchanges should actively contribute to the elevation of Shanghai as an international financial center, deepen the functions of financial factor markets, and attract more domestic and foreign financial institutions and medium and long-term funds to participate in China's gold market. At the same time, efforts should be made to promote the ecological construction of the gold market, strengthen comprehensive risk management systems, enhance dynamic market monitoring and analysis, and reasonably guide market supply and demand. Zhao Wenjian, a senior expert in the Precious Metals Business Department of ICBC, believes that on the basis of allowing insurance funds to allocate gold assets, China should explore investment models for long-term funds such as pension funds and social security funds in gold, and continue to promote the diversification of participants in the domestic gold market. At the same time, the scope and level of gold physical financing among financial institutions should be expanded to enhance market liquidity. Gold Pricing Enters a New Cycle In terms of enhancing the RMB's gold pricing power, Zhao Wenjian suggested continuing to expand the international board of gold exchanges and attracting more international members. At the same time, the application scenarios of "Shanghai Gold" should be broadened to make it the anchor for pricing various gold trading products in China. Additionally, financial institutions should be guided to provide comprehensive financial services for Chinese enterprises' overseas gold resource acquisitions, enhancing China's gold security capabilities. Xu Zhiyan, Chief Index Investment Officer, Assistant General Manager, and Fund Manager of Huaan Fund, believes that in addition to risk resistance, inflation hedging, and currency over-issuance hedging, the scarcity, profitability, and low or even negative correlation with other assets such as stocks are also worth noting. Adding gold assets to the asset allocation portfolio can broaden the efficient frontier, to some extent diversify risks, and increase returns. After 2022, the traditional negative correlation between gold and the US dollar's real interest rate has become less obvious. Xu Zhiyan pointed out that in recent years, due to central bank gold purchases, gold has risen in sync with the US dollar and US bond interest rates during the interest rate hike cycle, and gold has shown excess returns relative to US bonds, entering a new cycle. In the future, factors such as the risk of US recession, currency over-issuance, and deglobalization policies will benefit gold. Regarding the analytical framework for gold, Zhu Shanying, a senior researcher at the Macro Research Group of CITIC Futures Research Institute, stated that the decline in the US dollar's credit has historically supported the long-term bull market for gold, including the period of high inflation in the US from the 1970s to the 1980s, the impact of the 9/11 event in the early 2000s, and the bursting of the internet bubble, all corresponding to the decline in the US dollar index and the bull market for gold. "Of course, the contraction of US dollar credit is a grand narrative, and this grand narrative also needs to be supported by small-cycle logic." Zhu Shanying pointed out that different trading themes have emerged during the gold price rise since 2022, such as the US banking crisis in March 2023, and the themes of US secondary inflation, recession, and expectations for US Fed interest rate cuts in 2024. In the future, the expectation of US stagflation will strengthen in the short term. From a long-term perspective, the continuous contraction of US dollar credit, whether based on the US's own bond over-issuance or the trend of deglobalization, constitutes the foundation of the gold bull market. Continuously Improve the Gold Market and Institutional System, Enrich Gold Product Supply In the industry dialogue titled "From Improving Asset Allocation to Enhancing Pricing Power: Prospects for the Development of the Gold Trading Market," guests further discussed how to build a first-class Chinese gold market and how to enhance the RMB's voice in international gold price pricing. Xu Huizhu stated that to build a world-class gold exchange and promote the high-level opening of the gold market, on one hand, the market system and institutional system of the exchange's international board should be continuously enriched and improved. On the other hand, the construction of offshore products should be improved, and interconnectivity should be strengthened to provide more gold products and investment services for the return of offshore RMB funds. At the same time, the infrastructure system construction of the international board should be improved, and participation in the exchange and interaction of international standards and rules should be enhanced. Zhao Wenjian believes that after insurance funds join the Chinese gold market, the structure of gold market participants has been enriched. The characteristics of medium and long-term insurance funds are conducive to stabilizing the gold market, and they will also have a good effect on expanding the depth of the market, while enhancing the attractiveness of the Chinese gold market to international funds. To meet the preferences of different investors, Zhao Wenjian suggested further improving the supply capacity of gold trading products and the overall service capability of the gold market. From the perspective of asset allocation, Xu Zhiyan pointed out that gold ETFs bear the mission of "storing gold among the people." To help clients achieve value preservation and appreciation, asset management companies should do a good job in judging the price trends of gold assets and strengthen investment education. In addition, insurance and other funds choosing ETFs for gold allocation have domestic institutional advantages. Enhancing the RMB's pricing power for gold, gold ETFs can also play a more active and important role. After gold prices repeatedly hit new highs, Zhu Shanying believes that the combination of policies after Trump's election will lead to a potential economic downturn and inflation in the US, putting the US Fed in a dilemma. As long as the US Fed does not raise interest rates, this stagflation situation will be favorable for gold prices in the medium and short term. The "Lujiazui Financial Salon" is guided by the Shanghai Municipal Financial Office and the People's Government of Pudong New District, and hosted by the Secretariat of the "Lujiazui Financial Salon," with media support from Yicai and Caixin. This series of events will build a regular exchange platform that echoes the "Lujiazui Forum," through institutionalized, scenario-based, and internationalized operations, continuously outputting the "Pudong Wisdom" of financial reform, deeply empowering the high-quality development of Pudong's economy, and fully promoting the construction of the core area of Shanghai as an international financial center to a new height.

Gold has been one of the strongest performing assets this year, with international gold prices surpassing $3,200 per ounce, underscoring the heavy risk-averse sentiment in the market. On Monday, as US President Trump temporarily exempted tariffs on smartphones, computers, and other electronic products, market sentiment slightly recovered, leading to a slight decline in gold prices. However, Peter Grant, senior metals strategist at Zaner Metals, emphasized that ongoing uncertainties in trade and tariffs, a weak US dollar, and declining US Treasury yields will continue to support gold. Amid concerns about the US economy, investors are selling US Treasuries, which has also triggered additional purchases of gold. US Treasuries are usually another favorite of risk-averse investors, but now more people are choosing to trust gold. Robert Yawger of Mizuho Securities also stated that the single-day decline in gold is unlikely to become a short-term trend, as it will attract sufficient risk-averse funds and continue to consolidate near historical highs. China's Gold Rush On the other hand, according to data from the World Gold Council, as of April 11, ETF investments flowing into China's physical gold exchanges this month reached 29.1 mt, exceeding the 23.5 mt for the entire Q1 and the 27.8 mt inflow in the US in April. John Reade, senior market strategist at the World Gold Council, pointed out that if the rise in gold prices in Q1 was mainly due to US tariffs and Western ETF buying, the theme of the rise in Q2 may be entirely different, driven by a surge in interest from Chinese investors. Statistics show that the total size of the 14 gold ETFs in the Chinese market has now exceeded $120 billion, an increase of over 70% since the beginning of the year. Wind data shows that the siphon effect of leading gold ETFs is evident, while small and medium-sized gold ETF funds have doubled in size this year. At the same time, gold futures on the Shanghai Futures Exchange have also entered a strong upward trend with active trading, and domestic gold prices have been higher than international spot prices, indicating that the bullish sentiment among Chinese investors is intensifying. Image source: Jesse Colombo's report Independent analyst Jesse Colombo stated that last spring's gold bull market was mainly driven by the Shanghai Futures Exchange, while Western markets were largely on the sidelines at the time, and now similar signs are emerging in China's trading. He emphasized that the market tone has changed dramatically, indicating that the anticipated Chinese gold rush has begun and is likely to push gold prices to levels that will shock most people.

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[World Gold Council: Chinese Market Gold ETF Assets Under Management Surge 150% in 2024, Reaching a Record High] According to data released by the World Gold Council, in Q4 2024, Chinese market gold ETF demand turned positive, with inflows of approximately 15 billion yuan (around $2 billion, 7.5 mt), marking the strongest quarterly performance on record. For the full year of 2024, Chinese market gold ETF demand surged, with total inflows of approximately 31 billion yuan (around $4.4 billion, 55 mt). 2024 was the strongest year for Chinese gold ETF demand, with the total assets under management in the Chinese market reaching 71 billion yuan (around $9.7 billion), soaring 150% within the year and setting a new historical high. During this year, the total open interest in Chinese market gold ETFs increased by 87% to 115 mt, also breaking historical records.

The spot price of gold hit a record high of $2,080 per ounce on Thursday.