A citizen is passing by in front of Geumeunbang in downtown Seoul. /Photo=Newsis
The analysis that led to this year’s gold rally is supported by Chinese retail investors who speculated in gold. Chinese investors’ influence in the gold market has strengthened, with gold futures buying positions on the Shanghai Futures Exchange surging by more than 50% in the past six months.
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Shanghai gold futures trading surges, “China controls the price of gold”
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According to foreign media such as Bloomberg News and Financial News (FT), the gold purchase position held by futures traders on the Shanghai Futures Exchange is 295,233 contracts, equivalent to 295 tons of gold. This is an increase of almost 50% since the end of September last year, before geopolitical tensions escalated in the Middle East.
At the beginning of this month, the Shanghai Futures Exchange’s gold buying position was 324,857 contracts, which is the strongest position ever according to data from Bloomberg News, which has accumulated related data since 2015. Last week, gold trading volume on the Shanghai Futures Exchange soared more than five times compared to last year’s average, and analysts are paying attention to this as the background for the rise in gold prices, which exceeded $2,400 per ounce this month.
While international gold prices are soaring every day due to the Middle East crisis, gold trading in Korea is also rapidly increasing. Precious metals on display at a gold exchange in Seoul/Photo = News 1
John Reid, chief market strategist at the World Gold Council, told the FT: “Chinese speculators have their hands full with gold by the throat. China has been the biggest consumer of gold for decades, but is now at a point where it can exert pricing power. “It has reached,” he said.
Gold prices have risen more than 40% since November 2022. This was driven by record gold purchase demand from emerging market central banks seeking to diversify their reserves away from the U.S. dollar and a surge in interest rates. In addition, as demand for safe assets increased following the outbreak of the Israel-Gaza conflict in October last year, it reached an all-time high of $2,431 per ounce last week.
Even considering that gold is a defense against inflation and currency devaluation, a gold rally of this scale is difficult to understand. Moreover, India, the second largest global consumer of gold, did not join the gold rally, and Western funds were indifferent to gold. Exchange traded funds (ETFs) in Europe and the United States actually sold gold.
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Let’s buy physical gold bars… Invest in gold without individuals or institutions
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In the end, it is China’s purchasing power that has driven up the price of gold to an absurd degree. It is analyzed that Chinese investors, who had nowhere to go due to the fall in real estate prices and the stock market recession, aggressively increased the proportion of gold to diversify their portfolios, leading to a surge in gold futures contracts in March and April, which drove up the price of gold.
With the international gold price exceeding $2,400 (approximately 3.32 million won) per ounce (30g) for the first time in history, a stone ring was displayed at a gold and silver store in Seoul on the 14th. With the international gold price hitting record highs every day, the price of a domestic stone ring (3.75g) exceeded 450,000 won. /Photo = News 1
Zhongkai, which started as a PVC pipe manufacturer 30 years ago and expanded its business into futures trading investments, holds a large gold buying position. “The Russo-Ukrainian war and high inflation mean it is the right time to lock the fund’s entire position in highly leveraged gold,” Bian Siming, founder of Zhongkai and popular blogger, wrote in a blog post in 2022. According to financial information company Wind, a fund managed by Zhongkai recorded a return of more than 160% this year.
Gold has a long history as a savings tool in China. China is also the world’s largest gold consumer. Recently, as expectations for an interest rate cut by the U.S. Federal Reserve (hereinafter referred to as the Federal Reserve) have decreased and the value of the Yuan has fallen, not only institutions such as the People’s Bank of China but also individuals are increasing the proportion of their gold investments by purchasing physical gold bars.
Accordingly, gold futures trading volume on the Shanghai Futures Exchange increased explosively. This month, the average daily trading volume increased three times compared to the average for the previous 12 months. It peaked at about 1,200 tons on the 15th before prices began to fall this week, the highest since 2019.
On the other hand, there was little movement in the number of outstanding contracts. Bloomberg pointed out that this is because most buyers are day trading (short-term trading) rather than taking long-term positions. It is pointed out that short-term speculative demand has increased accordingly.
[저작권자 @머니투데이, 무단전재 및 재배포 금지]
