Chinese investors drive gold prices to new highs

Chinese speculators have been making huge bets on rising gold prices, driving the precious metal to an all-time high this month. The influence of Asian traders, particularly those in China, is now overshadowing their western counterparts in the bullion market.

Long gold positions held by futures traders on the Shanghai Futures Exchange (SHFE) have surged to 295,233 contracts, equivalent to 295 tonnes of gold. This represents a nearly 50% increase since late September, just before geopolitical tensions escalated in the Middle East. A record bullish position of 324,857 contracts was reached earlier this month, according to Bloomberg data.

One trading firm, Zhongcai Futures, has amassed a bullish position in SHFE gold futures worth nearly $4 billion, equivalent to over 2% of the Chinese central bank’s reserves of bullion. Gold volumes on SHFE have skyrocketed to more than five times last year’s average, reaching 1.3 million lots on the peak trading day last week.

John Reade, chief market strategist at the World Gold Council, noted that Chinese speculators have significantly impacted the gold market. The rally in gold prices, which have surged over 40% since November 2022, has been supported by record bullion purchases by emerging market central banks and the metal’s safe haven status amid global uncertainties.

Despite the rally, some analysts are surprised by the scale of the increase, especially considering outflows from US and European exchange traded funds. Chinese investors are diversifying into gold from other sectors like real estate and stocks, contributing to the metal’s rapid rise. Trading firms like Zhongcai have been at the forefront of this trend, with significant bets on gold futures driving the market.