Chinese investors invest heavily in gold; Asian demand prevents price decline
Chinese investors invest heavily in gold; Asian demand prevents price decline
The global gold market faced profit-booking pressure from traders after hitting a two-month high near $4,435 and retreated towards $4,399. However, Chinese institutional investors took advantage of the opportunity to absorb all the supply at lower prices. According to Bloomberg data, gold ETFs in China have seen inflows for 14 consecutive trading days, the longest inflow cycle since March.
During this period, more than $1.2 billion in new capital has entered the funds, with the largest daily inflow reaching $370 million. The rush of Chinese buyers is actually a reaction to the sharp 10% drop in China’s CSI 300 stock index in July. Institutional investors have turned to gold as the most liquid alternative asset and a safe haven to preserve the value of their assets, as they exit the stock market and the AI bubble. While physical and institutional demand in Asia has created a solid support floor for the yellow metal, global traders are turning their attention to the US Consumer Price Index (CPI). Analysts believe that higher-than-expected inflation could strengthen the likelihood of a rate hike by the Federal Reserve, which would mechanically strengthen the dollar and put pressure on gold prices. Conversely, deflation could pave the way for a rally towards $4,500. Currently, three main layers of support are protecting gold prices: first, the continued purchases of the People’s Bank of China (PBOC); second, the shift of capital from stocks to gold ETFs by Chinese institutions; and third, weak US employment data, which has raised the possibility of an interest rate cut. These structural factors have made even temporary price corrections immediately absorbed by buyers. Meanwhile, despite gold's strength, silver prices fell 2.3% on the day, reflecting the metal's greater sensitivity to industrial demand and interest rate fluctuations.