Spotlight on Mainland CHINA Gold Market and How It Is

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  The strength of Chinese gold demand has been a key driver behind the growth in local mine supply, especially given that gold cannot be freely exported from China.
• The establishment of the SGE in 2002 marked a shift of China’s gold industry from being a restricted to a market oriented period, allowing gold to be traded freely in the domestic market.
• Gross gold bullion imports into mainland China in 2025 totalled 901t, highlighting their importance in international bullion trade.

Since 2013, China has been the world’s largest gold consumer, with combined physical investment, jewellery demand, and industrial offtake in 2025 totalling 869t. Jewellery consumption used to be the country’s leading segment of gold demand, accounting for 61%-75% of the total until 2023. However, on the back of the structural shift in the jewellery market (notably a move towards lighter, premium collections) and a transition from quasi-investment purchases of gold jewellery to gold bars and investment in gold accumulation plans, we saw a turnaround from mid-2024. This was ultimately driven by growing consumer awareness, amplified by social media, of the more favourable buy-sell spreads offered by bars, which typically incur lower labour costs and are exempt from consumption tax. As a result, consumers became extremely price-sensitive during strong price rallies over the past few years. In turn, the jewellery supply chain’s shift from conventional products to premium collections with higher margins, as well as the new VAT policy, reinforced this trend. This culminated with retail investment for the first time outperforming jewellery consumption in 2025.  

On the supply side, since 2007 China has been the world’s largest gold producer. This saw four consecutive years of growth, reaching 392t in 2025. Fewer safety and environmental stoppages impacting production, along with higher gold prices, underpinned the rise in gold output. To meet the country’s substantial demand for gold, China is also the world’s largest  gold bullion importer, with total imports reaching 901t in 2025.

Market Liberalisation

The history of the Chinese gold market can be divided into three broad phases: 1949-1993, the restricted period; 1994-2001, undergoing reform; and from 2002 onwards, market liberalisation, after the establishment of the Shanghai Gold Exchange - SGE. During the first phase, gold production was an essential way for the government to increase its foreign exchange reserves. The allocation of gold was therefore a typical feature of a planned economy, being tightly controlled by the government. In 1993, China began aligning its domestic gold prices with the international market. The following year, it abolished all preferential policies for gold producers and started its market-oriented price mechanism. 

From 1995 onwards, China’s foreign exchange reserves surged, surpassing US$100bn in 2000 before reaching $403bn in 2003. Consequently, the significance of gold in China’s foreign exchange reserves began to diminish. Meanwhile, increasingly affluent Chinese households and individuals began shifting their focus on gold from short-term returns on wealth to its long-term value preservation and intergenerational transfer. All these factors led to the establishment of the SGE on 30th October, 2002. This marked the point when China’s gold industry became fully market-driven, entering a new era where market forces determined prices and trading.

Initially, the SGE was mostly established as a commodity trading platform to help facilitate the transition of gold trading from the People’s Bank of China’s (PBOC’s) centralised allocation and procurement system to market-driven trading. In 2004, the SGE launched gold spot deferred products (Au (T+D)), designed for institutional investors, marking a transformation towards a specialised financial market. At the same time, the China Banking Regulatory Commission approved the four major state-owned commercial banks (Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank) to launch gold investment services for retail investors. This new regulation, together with the launch of the Au (T+D) contract, led to a gradual increase in gold retail investment products, including minted gold bars, paper gold trading, and Gold Accumulation Plans. 

In 2008, physical gold trading accounted for only 27% of the SGE’s total trading volume, with Au (T+D) dominating at 73%. To further support institutional and retail investors demand, on 8th January 2008, gold futures contracts were launched on the Shanghai Futures Exchange (SHFE). It was arguably the establishment of these two exchanges that helped strengthen China’s role in the global gold market.

Importantly, the SGE did not immediately open to foreign participation. However, in 2008, the SGE began admitting overseas financial institutions to trade on its main board. A more significant milestone came in 2014 with the launch of the SGE International Board in the Shanghai Pilot Free Trade Zone, which has allowed overseas institutions to use offshore RMB for trading on the SGE main board. In 2016, the SGE launched the “Shanghai Gold” pricing platform, conducted twice daily at 10:15 AM and 2:15 PM (or 3:00 PM). At the time of writing, the SGE has 104 foreign membership companies.

In essence, the SGE has evolved into a gold market featuring various trading methods (including auction, inquiry, and pricing), multiple time dimensions (such as spot, deferred spot, and forward), several precious metals (gold, silver, and platinum), and a number of product types (including standard gold, gold coins, and gold derivatives). On the back of gold’s impressive price gains and a series of record high prices in 2025, trading volumes of the SGE Au(T+D) surged by 66% y/y to a five-year high of 5,826t. Meanwhile, trading volumes of gold futures on the SHFE enjoyed a 49% y/y gain to a historical high of 110,020t.

By LBMA

Source: LBMA

• 
  Morgan Stanley says gold is trading less like a haven than before.
• Silver and aluminium look stronger on supply and demand trends now.
• Copper lacks the backdrop needed to support a lasting bull move now.

Gold’s traditional role as a portfolio shelter is coming under closer scrutiny, according to Morgan Stanley, which argues the metal’s recent price action has been more mixed than investors typically expect from a classic haven.

The bank’s view comes after a volatile stretch across commodities over the past six weeks, driven by anxiety over conflict involving Iran, shifts in interest rate expectations and broader market turbulence.

Although a ceasefire was agreed on Wednesday, that has not fully restored confidence in gold’s defensive behaviour.

The metal has pulled back sharply in recent weeks after rallying to record highs earlier in 2026, with prices coming under pressure as the US dollar strengthened and investors adjusted to a more uncertain rate outlook.

For Morgan Stanley, that reversal matters because it highlights how gold has not consistently responded to geopolitical stress in the way investors might typically expect.

Instead of attracting uninterrupted haven flows, gold has at times weakened as liquidity pressures, positioning and macro factors — particularly real rates and the dollar — have taken precedence.

In that sense, Morgan Stanley’s argument is less about gold losing relevance altogether and more about the market changing the way it prices and expresses safety.

Why gold’s role is being questioned

The bank’s core point is that gold’s near-term performance appears increasingly influenced by macro forces and large institutional flows rather than a simple flight-to-safety dynamic.

Analysts say price action is being shaped by central bank demand, exchange-traded fund positioning and shifts in currency and rate expectations, rather than by a broad, instinctive rush into defensive assets.

That shift matters because it can make gold behave less like a straightforward hedge and more like an asset sensitive to liquidity conditions and portfolio rotation.

Morgan Stanley’s more cautious stance reflects this changing dynamic: gold may still offer long-term diversification benefits, but its short-term behaviour is proving less predictable as a geopolitical hedge.

In practical terms, the bank is arguing that investors should be more selective.

Gold can still serve as a store of value over time, but recent moves suggest it is no longer the clearest or most immediate expression of a defensive metals trade.

Why silver looks more compelling

Morgan Stanley is more constructive on silver, which it sees as having a stronger fundamental underpinning despite recent volatility.

Silver has retreated from its early-2026 highs, but the bank and industry data point to continued support from underlying supply-demand dynamics.

One of the main reasons is the persistence of supply deficits over several years, which has tightened the physical market even when prices have been volatile.

At the same time, industrial demand remains a key pillar, particularly from sectors such as solar and electronics, even as efficiency gains and substitution trends begin to moderate usage growth.

That does not mean silver is free from speculative swings.

Earlier surges were amplified by investor positioning, and volatility remains a feature of the market.

Even so, silver still appears to have a more tangible bullish case than gold because its outlook is supported not only by sentiment, but also by structural demand and constrained supply.

Why aluminium stands out

Aluminium is another metal where Morgan Stanley sees a clearer bullish case.

The bank’s constructive view rests largely on supply-side constraints and the high energy intensity of production, which limits how quickly output can respond to demand.

London Metal Exchange aluminium prices have remained supported in recent months, with analysts pointing to tight supply conditions even as broader macro uncertainty persists.

China’s capacity controls and the pressure of elevated power costs on smelters are central to that story.

Production disruptions in some regions and the difficulty of restarting idled capacity have reinforced the supply tightness.

Because aluminium production is closely tied to electricity availability and pricing, supply responses tend to be gradual rather than immediate.

As a result, prices may remain relatively resilient even if broader economic conditions soften.

Why Morgan Stanley is more balanced on copper

By contrast, Morgan Stanley takes a more balanced view on copper.

While the metal retains strong long-term support from electrification and energy transition trends, the bank sees a more mixed near-term backdrop shaped by demand uncertainty and evolving market dynamics.

That makes copper different from the more clearly supply-constrained aluminium story or the structurally tight silver market.

It remains a strategic metal with long-term appeal, but near-term price direction may be less straightforward.

The broader takeaway is that investors can no longer treat the metals complex as moving for the same reasons.

Gold’s short-term behaviour is becoming more macro-driven, silver is supported by tighter fundamentals, aluminium is benefiting from supply and power constraints, and copper sits between strong long-term demand and a more uncertain near-term outlook.

For portfolio managers, that means the next phase of metals investing may be less about owning a generic hedge and more about identifying where the real structural pressure points lie.

By Invezz

Source: Invezz

Hong Kong Gold Vault: China’s Bullion Power Play

As China aggressively seeks to exert greater influence on the global commodities landscape, Hong Kong is poised to become a pivotal battleground, particularly in the Gold market. Ambitious plans are underway to transform the city into a regional gold hub, but significant hurdles remain as Beijing juggles competing priorities of market dominance, resource security, and industrial control.

Hong Kong’s Golden Ambitions

Hong Kong is rolling out targeted incentives to lure gold refiners and precious metals companies, with a focus on achieving London Bullion Market Association (LBMA) certification. This move, spearheaded by InvestHK, aims to elevate Hong Kong’s status in wholesale bullion transactions. A key initiative is the collaboration with the Shanghai Gold Exchange and Shenzhen regulators to streamline trade between Hong Kong merchants and mainland refiners. These efforts extend to the development of ETF-linked products and even the exploration of tokenised gold.

The strategic importance of Hong Kong is further underscored by a recent agreement with the Shanghai Gold Exchange to establish a central gold clearing platform. This platform is designed to facilitate trade settlement and mitigate counterparty risk. The government has set an ambitious three-year goal to significantly expand gold storage capacity to over 2,000 metric tons, solidifying Hong Kong’s position as a regional gold reserve.

China’s Broader Commodities Strategy

China’s ambitions extend beyond gold, encompassing a broader strategy to secure its position in critical commodities. The National Development and Reform Commission (NDRC) is actively addressing overcapacity in heavy industries, particularly copper smelting. Concurrently, efforts are being intensified to bolster mineral exploration, build strategic reserves, and proactively secure resources from overseas.

The Quest for Pricing Power

Despite being the world’s leading gold producer and consumer, China’s influence on global gold pricing remains limited, with London and New York dominating the market. Hong Kong undersecretary for financial services and the treasury, Joseph Chan Ho-lim, has articulated a clear objective: to expand China’s market share and influence on international gold prices.

Chinese miners are leveraging Hong Kong’s exchange to Finance global acquisitions, exemplified by Zijin Gold International’s planned C$5.5 billion acquisition of Canada’s Allied Gold. The People’s Bank of China has also been steadily increasing its gold reserves for the past 15 months, reflecting a broader trend among nations seeking to safeguard their assets within their own borders, particularly in light of geopolitical uncertainties.

Strategic Priorities and Potential Pitfalls

China’s latest five-year plan highlights the importance of critical minerals such as rare earths and reaffirms its commitment to maintaining its leadership in this sector. This includes tightening export controls to safeguard its strategic advantage. The plan also anticipates significant grid expansion and investment in clean energy, which are expected to drive up demand for copper and aluminium. However, the NDRC has reiterated concerns about overcapacity, specifically in copper smelting, signalling potential regulatory interventions to manage industry growth.

Global Demand and Investment Trends

Analysts at Swiss Resource Capital highlight copper’s critical role in the renewable energy transition and electrification, making it a key focus for investors and policymakers. Gold, meanwhile, continues to attract buyers seeking a safe haven in times of economic uncertainty. China’s emphasis on industrial modernisation in its 2026-2030 planning round further underscores the importance of both metals.

Retail Appetite and Hub Aspirations

Strong retail demand for jewellery and watches in China is evident in the robust sales figures reported by China Duty Free Group during the Spring Festival break, with a 23.7% jump in sales at its cdf Sanya duty-free complex in Hainan. This trend highlights the growing consumer appetite for precious metals, further fueling China’s ambitions to establish Hong Kong as a gold trading hub.

Challenges and Uncertainties

Despite the ambitious plans, establishing a credible gold hub in Hong Kong is not without its challenges. Refineries must adhere to stringent global standards, and the market requires genuine activity and liquidity. Offshore investors are closely scrutinising China’s capital controls and the potential impact of sanctions. Moreover, the government’s pronouncements on overcapacity and stockpiles have been vague, leaving room for uncertainty and potential surprises.

In the near term, Hong Kong faces critical questions: Will refiners relocate capacity to the city, and will foreign buyers embrace Hong Kong for bulk delivery and storage? For Beijing, the central question is whether investing in infrastructure will truly translate into greater influence over global benchmark prices. The success of China’s efforts to reshape the global commodities landscape hinges on addressing these challenges and navigating the complex interplay of market forces, geopolitical considerations, and regulatory interventions.

By Adebayo Durojaiye

Source: TMAStreet

Diversification with a heart of gold

Gold has shone brightly amid geopolitical uncertainty and shifting policy dynamics, drawing investors toward its perceived safety. We see it as an appealing, strategic diversifier in today’s environment.

Gold has played a central role in commerce, diplomacy and wealth preservation for millennia. From ancient Egypt to the Roman Empire, it has been used to signify power, settle international obligations and mint high?value currency.

Across the ages and immeasurable global changes, gold has retained its role as a universally recognised store of wealth. For modern investors, it remains a constant in an increasingly complex world.

At Coutts, we have re-introduced gold into our multi-asset discretionary investments through a modest, strategic allocation. Examining the precious metal through our Anchor and Cycle investment process – which blends long-term analysis with tactical agility – we found that even a small weighting could improve long?term outcomes. It has the potential to enhance portfolio robustness and help mitigate key market risks.

Powerful diversification

Over the past year, gold has undergone a dramatic appreciation against a backdrop of chronic uncertainty. Tariffs, geopolitical tensions and elevated government debt have all weighed on confidence.

Gold rose from around $2,600 per ounce in December 2024 to more than $5,500 per ounce last month – a new all?time high. Prices then softened amid some profit taking and the prospect of a new US Federal Reserve Chair who could favour higher interest rates. Prices remain volatile, but are still elevated by historical standards.

For us, however, gold’s true value lies less in short?term movements – which are often erratic (more on that later) – and more in its powerful diversification characteristics.

Past performance should not be taken as a guide to future performance. The value of investments, and the income from them, can fall as well as rise and you may not get back what you put in. You should continue to hold cash for your short-term needs. This article should not be taken as advice.

Government bonds still best for recession risk

Gold should be viewed as part of the diversification toolkit. When it comes to hedging recession risk, we believe that high?quality government bonds remain the most effective instrument. Their relative security often makes them the warm, dry shelter investors flock to when economic storms brew overhead.

While recession is not our base case currently – our analysis shows the economy now in an expansion phase – it is prudent to be prepared should this change. Even though we don’t currently expect bonds to perform as well as equities over the coming months, we continue to hold them for this important reason.

Growth risks are not the only challenges investors face. Risks around geopolitics, inflation and fiscal sustainability are also significant – increasingly so in recent years – and we expect this to continue. This is where gold could shine as a diversifier.

Historically bonds and gold move in a different direction to equities. However, bond-equity correlations have increased in recent years due to elevated inflation and more uncertain central bank policy. Under these conditions, gold’s ‘safe haven’ status and low correlation to equities could become increasingly valuable.

Gold also has a long history of delivering positive returns during severe equity drawdowns, offering support precisely when investors need it most.

It is these characteristics – low correlations and a decent track record during periods of stress – that we examine to assess the value of any potential diversifier.

What’s next for gold?

Looking ahead, several structural tailwinds could continue to support gold.

Fiscal deficits across developed markets remain elevated. Within the G7, government debt?to?GDP ratios range from 64% in Germany to 237% in Japan, with six of the seven economies above 100%.

These dynamics raise periodic concerns about fiscal sustainability, contributing to bouts of volatility in government bonds. In such environments, investors may increasingly turn to gold as a diversifier.

A second tailwind is continued central bank buying. Since 2022, central banks have accumulated substantial quantities of gold as they seek to diversify reserves away from US dollar?denominated assets. While forecasting future purchases is difficult, we do not see this trend reversing.

Small that glitters…

Despite its ancient pedigree, gold remains a small financial market, which partly explains the price swings observed in recent months.

The World Gold Council estimates that around 219,890 tonnes of gold have been mined throughout history. But only about 90,000 tonnes are accessible to financial markets – bars, coins, exchange traded fund holdings and central bank reserves.

At an indicative price of $5,000 per ounce, this equates to a market value of roughly $14.5 trillion, compared to a global equity market of approximately $125 trillion and fixed income figure of around $145 trillion. 

Given gold’s smaller scale, even marginal changes in demand and supply can meaningfully influence price behaviour, making significant price moves more common than in other major markets.

Recent volatility illustrates this. Markets were surprised by President Donald Trump’s nomination of Kevin Warsh as US Federal Reserve Chair, as Warsh was perceived as potentially less inclined toward rate cuts than other candidates. The resulting strength in the US dollar contributed to a sell?off in gold.

This move was likely amplified by the Chicago Mercantile Exchange’s decision to raise margin requirements for gold futures – effectively increasing the collateral needed to open or maintain positions. Higher margin requirements make positions more expensive to hold and can prompt some investors to scale back or exit trades, amplifying price moves.

Strategic rather than tactical

Such episodes highlight why tuning out short?term market moves is important, but quite difficult. That is why we see gold as part of the Anchor element of our process (strategic, long term) rather than Cycle (tactical, short term).

We think modest strategic allocations could improve the robustness of portfolios or funds. But extreme, and sometimes opaque, price moves are a consequence investors must bear in exchange for improved diversification.

By Joe Aylott, Multi-Asset Strategist

Source: Coutts

Gold, Silver Stumble at the End of Best Year Since the 1970s

Gold and silver fell on the last trading day of 2025, though both remained on track for the biggest annual gain in more than four decades as a banner year for precious metals drew to a close.

Spot gold hovered around $4,320 an ounce, while silver slid toward $71. The two have seen exceptional volatility in thin post-holiday trading, plunging Monday before recovering Tuesday and dropping again Wednesday. The big swings prompted exchange operator CME Group to raise margin requirements twice.

Both metals are on track for their best year since 1979, supported by strong demand for haven assets amid mounting geopolitical risks and by interest-rate cuts by the US Federal Reserve. The so-called debasement trade — triggered by fears of inflation and swelling debt burdens in developed economies — has helped supercharge the scorching rally.

In gold, the bigger market by far, those factors spurred a rush by investors into bullion-backed exchange-traded funds, while central banks extended a years-long buying spree.

Gold is up about 63% this year. In September, it eclipsed an inflation-adjusted peak set 45 years ago — a time when US currency pressures, spiking inflation and an unfolding recession pushed prices to $850. This time around, the record run saw prices smash through $4,000 in early October.

“In my career, it’s unprecedented,” said John Reade, a market veteran and chief strategist at the World Gold Council. “Unprecedented by the number of new all-time highs, and unprecedented in the performance of gold exceeding the expectations of so many people by so much.”

Silver has notched up a gain of more than 140% during the year, driven by speculative buying but also by industrial demand. The metal is used extensively in electronics, solar panels and electric cars. In October, it soared to a record as tariff concerns drove imports into the US, tightening the London market and triggering a historic squeeze.

The new peak was then passed the following month as US rate cuts and speculative fervor drove prices higher. The rally topped out above $80 earlier this week — in part reflecting elevated buying in China.

Yet the latest move swiftly reversed, with the market closing down 9%  Monday then swinging the following two days. In response to the extreme volatility, CME Group again raised margins on precious-metal futures, meaning traders must put up more cash to keep their positions open. Some speculators may be forced to shrink or exit their trades — weighing on prices.

By Yihui Xie and Jack Ryan

Source: Yahoo

Morgan Stanley Says Gold Pullback Is a Buying Opportunity, Lifts Focus to 2026

The gold price ended the week at 4,219.53 dollars per ounce, up 1.35 percent, extending a strong run that has kept the metal well bid through late November. 

Prices have held firm after a series of volatile sessions, with last week’s moves ranging between 4,074 and 4,218 dollars, as investors continued to rotate back into precious metals.

Morgan Stanley calls gold its top pick across the commodities complex and expects the backdrop to stay supportive into 2026.

The bank points to a decisive shift in investor behaviour this year, with ETFs reversing four years of net selling and adding the largest tonnage since 2020.

It expects that demand to continue as interest rates fall, while central banks keep adding to reserves and jewellery consumption shows early signs of stabilising.

The bank says demand for real assets has also strengthened as investors reassess portfolio hedges against inflation risks and economic uncertainty.

With that backdrop in mind, Morgan Stanley views the latest dip in prices as an entry point and holds a mid-2026 forecast of 4,500 dollars per ounce.

Risks include further bouts of volatility that could divert flows to other asset classes, or any shift by central banks toward reducing reserves.

Silver is also on Morgan Stanley’s radar, with the market likely to remain in deficit and prices expected to stay close to record territory.

By Dave Taylor

Source: Exchange Rates UK