The New York Times reported on May 5, 2024
As the price of gold soared to its all-time high this year, Lin joined the buying frenzy, buying some gold "beans", small pieces of precious metal the size of pebbles, every month.
For Ms. Lin, a 25-year-old administrative worker in southern China, the $80 gold bean — small enough to fit on your fingertips and weighing about one-thirtieth an ounce — is an affordable way to buy gold without having to spree on jewelry, bars or coins. She has dabbled in equity investing in the past, but she says buying gold, especially in this fun way, fueled her enthusiasm to continue investing.
"I'm still working hard to save more money," Ms Lim said.
Often considered a safe investment in times of geopolitical and economic turmoil, gold prices soared during Russia's invasion of Ukraine and the war in Gaza. However, gold has proven to be more resilient and for a longer period of time as it climbs to a high above $2,400 an ounce. The reason lies in China.
As Chinese consumers falter in traditional investments such as real estate or stocks, they flock to gold. At the same time, China's central bank has steadily increased its gold reserves while reducing its holdings of U.S. bonds. Chinese speculators have added fuel to the fire, betting that gold still has room to appreciate.
China already has considerable influence in the gold market. In the recent bull run, China's influence has become even more apparent. In fact, the global gold price has risen by almost 50% since the end of 2022. Despite its traditionally relatively weak investment appeal, the price has continued to climb to new highs due to factors such as rising interest rates and a stronger US dollar.
Last month, gold prices soared even after the Federal Reserve signaled that it would keep interest rates higher for longer. So far this year, gold prices have continued to appreciate even as the US dollar has risen against almost all major currencies in the world.
The price of gold has fallen back to around US$2,300 an ounce, but there is a growing perception that the gold market is no longer dominated by economic factors, but by the whims of Chinese buyers and investors.
Ross Norman, chief executive of Metals Daily.com, a London-based precious metals information platform, said: "China is undoubtedly driving the price of gold. The flow of gold to China has gone from a constant stream to an absolute torrent."
According to the China Gold Association, China's gold consumption in the first quarter increased by 6% compared to the same period last year. This is another increase after last year's 9% increase.
With traditional investments lackluster, gold investment has become even more tempting. China's real estate sector, where most households save money, is still in crisis. Investor confidence in China's stock market has not yet fully recovered. A series of large investment funds targeting the wealthy have collapsed after failed to bet on real estate.
With no better options, money flowed into gold-focused Chinese funds, and many young people began to collect small amounts of gold beans.
Online merchants are actively peddling golden beans. On Alibaba's Taobao, one of China's largest e-commerce platforms, a merchant sells golden beans on a livestreaming platform. It is a hybrid of home shopping network and Amazon. The live broadcaster said that buying golden beans "is like shopping, but it is also an investment".
These small beans come in five shapes, one of which resembles a peanut and the other resembles a persimmon. She said that each bean costs $87, and one person can buy this gold boom for the money of a hot pot.
Kelly Chung is a teacher in Beijing who has been buying gold since the beginning of the gold pandemic in 2020. She has amassed more than two pounds of gold bars and also invests in gold through exchange-traded funds. She said she was inspired by an old saying: "Treasure jade in prosperous times, hide gold in troubled times"
When she sensed that the world was getting more chaotic, Ms. Chung increased her reserves, betting that the price of gold would only climb. Now that she's stopped buying, she's not ready to sell yet. She saw no reason to do so. China's economy is still struggling, and neither real estate nor equities seem to be sound investments.
"Money has to have somewhere," she said.
Another major buyer of Chinese gold is China's central bank. In March, the People's Bank of China increased its gold reserves for the 17th consecutive month. Last year, the People's Bank of China bought more gold than any other central bank in the world, and its gold reserves increased by more than the highest level in nearly 50 years.
The Chinese government buys gold to diversify its reserves and reduce its dependence on the US dollar, which has long been considered the most important reserve currency. China has been reducing its holdings of U.S. Treasuries for more than a decade. As of March, China held about $775 billion worth of U.S. debt, well below the roughly $1.1 trillion in 2021.
Guan Tao, the global chief economist at Bank of China International in Beijing, said that when China used to increase its gold holdings, it bought it domestically with the renminbi. But this time, he said, the PBOC was using foreign currency to buy gold, which effectively reduced its exposure to the dollar and other currencies.
The US Treasury Department made a rare freeze on Russia's holdings of dollars in accordance with the sanctions imposed on Moscow, after which a number of central banks, including China, began to buy gold. Other U.S. allies have imposed similar restrictions on their currencies.
Mr. Guan said the sanctions have shaken "the foundation of trust in the current international monetary system" and forced central banks to protect their reserves with more diversified holdings. "We can see that this rally in gold may be different from the past," he said.
Although the Chinese government has been buying gold, it accounts for only 4.6% of China's foreign exchange reserves. In percentage terms, India holds almost twice as many gold reserves as China.
The combination of aggressive retail purchases by Chinese consumers with purchases by the central bank has attracted the interest of speculators in the Shanghai market, who are betting that this trend will continue. The average gold trading volume on the Shanghai Futures Exchange in April more than doubled compared to a year earlier.
Mr. Norman of the Precious Metals Daily said: "They are following the trend. "China is now dominating the gold market.
For Ms. Lim, buying golden beans is a satisfying thing, she says, because it feels like an easy shopping when in reality she is investing her money in something she can touch. She said she would continue to buy more golden beans.
"The price of gold always goes up and down," she said. "However, the increase is within the range I can afford, so I think it's okay."