In an unprecedented move, the People's Bank of China has allocated additional quotas for certain commercial banks to import gold, responding to the growing demand from institutional and individual investors in China.
This decision comes at a critical time amid the escalating trade war between the United States and China, which has significantly impacted the global economy.
Typically, the central bank of China imposes restrictions on the amount of physical gold that enters the domestic market. However, according to sources familiar with the matter, additional quotas were allocated last week to meet the noticeable surge in demand.
Although this decision has not been officially announced yet, it has garnered widespread attention from global markets.
Gold Prices Hit Significant Highs
Gold prices have experienced a significant surge since the end of 2022, reaching record levels. This sharp increase in prices is attributed to several factors, notably trade tensions and rising geopolitical uncertainty, which have driven many investors toward gold as a safe-haven asset.
Moreover, gold-backed ETFs in China have seen unusually strong inflows, with insurance funds and investment funds seeing notable increases in recent months.
Despite this strong demand, insiders have confirmed that the new quotas allocated are not an indication that the People's Bank of China plans to buy large quantities of gold but rather a response to requests from commercial banks facing increasing pressure due to high demand.
Optimistic Gold Price Forecasts
According to Goldman Sachs analysts, gold is expected to reach $4,000 per ounce by mid-2026. The bank has also raised its forecast for the end of 2025, from $3,300 to $3,700 per ounce, citing stronger-than-expected demand from central banks and rising inflows into exchange-traded funds due to concerns about a potential recession.
The bank noted that if a recession were to occur, ETF inflows could accelerate further, pushing gold prices to $3,880 per ounce by the end of the year.
However, if economic growth surprises to the upside, with reduced uncertainty about policies, gold prices are likely to return to the bank's forecasts based on interest rates, with prices approaching $3,550 per ounce by the end of 2025.
China’s Rising Gold Demand
China's demand for gold has seen a significant boost, with the Chinese government expanding a pilot program that allows insurance funds to invest in gold as part of asset allocation strategies.
Trade tensions have played a key role in driving this demand, as gold continues to be a safe-haven investment amid global economic concerns.
Conclusion
China's new move to expand gold imports signals increasing economic challenges in the global market.
With demand for gold continuing to rise and prices reaching record levels, analysts predict that this trend will likely continue in the near future, potentially impacting the global gold markets.
