Chinese Citizens FLOCKING to Gold

The Chinese Central Bank isn’t the only one buying gold. Savings rates are rising, so your everyday Chinese citizens are flocking to gold in an effort to save for a rainy day. Gold’s traditional safe haven status is literally “written” into Chinese culture, as the character for any kind of financial concept, includes the character for gold (?). Perhaps unironically, the word for ‘money’ (?)  includes the same character used in ‘shallow’ and ‘superficial’ (?).

Gold purchases were up 37.4% in March year-on-year in the Middle Kingdom as households continue to batten down the hatches on their risk exposure. There were also an additional 9.9 trillion yuan in savings reported in Q1 for Chinese households. This comes after a 17.8trl boost to household savings in all of 2022.

Inflation expectations are high all around the globe, and while the prolonged covid lockdowns in China may have delayed a day of reckoning, consumers are gearing up for price rises ahead. One major factor driving renewed interest in gold is the rise in economic uncertainty. A growing chorus of analysts are now looking for gold to hit record highs this year as markets continue to downplay recession and inflation risks.

"Consumer interest in precious metals (comes) as a potential safe haven and inflation hedge, as many consumers do not expect low inflation in China to continue," said Ben Cavender, managing director at China Market Research Group.

This also comes with the well publicised Central Bank demand. Data from China’s central bank shows that it bought 15 tonnes of gold last month. This is the third consecutive month China has increased its gold reserves. Since November, gold prices have bounced up more than $300 since their November lows. The move back up to the US$2000-2100 range has formed a ‘triple top’. While ‘double-tops’ are well known as a harbinger of a bear market, technical analysts see a triple top as a ‘third time lucky’ scenario.

For those sitting on the sidelines wondering when gold is going to drop back down to levels we were used to seeing in 2021 and 2022, the longer gold holds steady above US$2,000 an ounce, the stronger that support is likely to become.

Is third time a charm for gold?