Gold-backed exchange-traded funds (ETFs) in China, the world’s largest bullion market, are experiencing significant growth as the precious metal sets new records, investor demand for alternative assets increases, and regulatory changes allow for greater market access. In the first three weeks of February, onshore fund holdings grew by 17.7 tons, nearing the monthly record of 20.9 tons set last October, according to data from the World Gold Council, which is supported by gold producers.
Over the past year, gold has emerged as one of the top-performing commodities, surging more than 40%, although its upward momentum paused recently. The metal’s rise has been driven by robust central-bank purchases, including from China, along with interest rate cuts by the Federal Reserve and a surge in demand for safe-haven assets due to U.S. President Donald Trump’s contentious trade and geopolitical policies.
A significant development earlier last month further fueled the demand for gold in China. A new pilot program allowing insurers to invest in gold for the first time provided a fresh boost to the market. This initiative has contributed to the surge in ETF inflows, according to Wang Qiang, an ETF analyst at China Asset Management Co.
“Insurers may increase gold holdings when prices adjust downwards, providing support,” Wang noted.
Despite rising gold prices dampening domestic jewelry consumption, investment demand in China remains strong, driven by underwhelming performance in traditional assets like local equities and a weakening yuan. Moreover, the country is grappling with a property crisis that has negatively impacted home prices.
“Investors are recognizing gold’s ability to hedge against currency depreciation and diversify risks,” said Xu Zhiyan, fund manager at Huaan Yifu Gold ETF, the country’s largest gold ETF, which holds more than 50 tons of the precious metal. Xu highlighted that Huaan’s management fees are significantly lower—about one-eighth to one-sixth—compared to the costs of purchasing physical gold bars.
The trend in China reflects a broader global movement. So far in 2025, global holdings in bullion-backed ETFs have risen by approximately 81 tons, reaching the highest level since January 2024. While China-based ETFs are smaller in comparison to those abroad, their share of recent global inflows has been increasing.
Major financial institutions remain optimistic about gold’s prospects, with several predicting that the rally could continue. Goldman Sachs, for example, has set a year-end target of $3,100 per ounce, with a possibility of it reaching $3,300. At present, spot gold is trading near $2,865, below its recent peak of $2,956.19.
Chinese institutional investors have not yet heavily allocated to gold relative to their global counterparts. Wang Xiang, fund manager of Bosera Gold ETF, the second-largest in China, noted that the country’s insurance pilot program limits gold investments to just 1% of total assets, significantly lower than the 7% to 10% typical for long-term global insurance funds or sovereign wealth funds.
“Domestic investors will gradually increase their gold holdings,” Wang said. “China, as the largest consumer and producer of gold, can exert even more influence on the global gold market.”
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