In April the price of gold reached its all-time high, exceeding 2,400 dollars an ounce (real time prices here), a value almost double that recorded five years ago. A detail which, in the following month, encouraged many citizens in China to invest – both in small and large quantities – in the precious metal. La trend found among Chinese investors, and who told the New York Times, is to purchase very small grains of gold weighing approximately one and a half grams at the price of 80 dollars each. A particularly convenient way to take advantage of the gemstone’s moment of success while minimizing risks.
The precious metal in China
Financial markets have always considered gold a safe investment and, due to the geopolitical tensions of the moment linked to the wars in Ukraine with Russia and in Gaza between Hamas and Israel, purchases of the yellow metal have increased dramatically. The latest rise, just what in April led to the record of an all-time high, it is also due to greater confidence of investors on whether the Federal Reserve will cut interest rates by the end of this year. Thus, prices have reached prices up to 30% higher than about three months ago. China, in particular, is not new to the gold market, but the China Gold Association (Cga) recorded an increase in consumption of approximately 6% more in the first three months of 2024 compared to the same period of the previous year .
Collapse of the real estate market
Giving even further credence to this veritable investment by China in gold is the decline in confidence in more traditional investment sectors. First of all the real estate market, but also the stock market. Both consequences of the real estate crisis in the country, which began about three years ago and materialized with the collapse of the stock of Evergrande, the second largest Chinese real estate company by apartment sales, on the Hong Kong stock exchange last September. According to the forecasts of ten of the largest investment banks, including Goldman Sachs and Morgan Stanley, the decline of the construction sector in China could continue into 2024 (last year showed a decline of 8.4%). The fear is that this will limit economic growth, considering the minimal efforts of Xi Jinping’s government to reverse the situation.
The People’s Bank of China
Although, in reality, the People’s Bank of China, the country’s central bank, follows the interests of its citizen investors in gold. In March, in fact, according to what the New York Timesthe lender purchased gold for its reserves for the seventeenth consecutive month and would have reached a quantity never seen in the last fifty years. One of the reasons could be – precisely as a consequence of the decline in real estate – the intention to diversify one’s investments to avoid major repercussions. But certainly one of China’s wishes, abundantly expressed in recent months, is to reduce dependence on the US dollar. As of March, the country held about $775 billion in U.S. debt, already down from 2021 by about $1.1 trillion.
