The explosive rise – and equally spectacular declines – in the price of gold are bringing a factor into sharp focus that few considered until recently: China. Analysts are pointing to intense speculative activity by Chinese investors as being behind the volatility of recent weeks, with U.S. Treasury Secretary Scott Bessent describing the moves as “unruly,” reminiscent of classic speculation.
On January 29, the price of gold reached a record high of $5,594 per ounce, only to plummet nearly 10% the following day – the largest single-day drop in decades. Since then, the precious metal has struggled to maintain a stable level above $5,000, with daily fluctuations resembling speculative trading more than a traditional “safe haven.” As of Friday morning, it had fallen below that level again.
Doubling of ETF Holdings and a Surge in Futures Contracts
According to data from Capital Economics, Chinese gold-backed exchange-traded fund (ETF) holdings more than doubled from the beginning of 2025. Simultaneously, trading volumes in gold futures contracts have risen sharply. Average daily volumes on the Shanghai Futures Exchange have approached 540 tons in early February, following a 2025 daily average of 457 tons. The intensity of the moves has even prompted the Shanghai Gold Exchange to repeatedly increase margin requirements, attempting to curb the volatility.
Analysts emphasize that the increased use of leverage – despite successive margin hikes – is amplifying the sharp fluctuations. They caution that the growing use of futures contracts and leverage doesn’t indicate investors are simply seeking a safe haven, but rather are taking more aggressive positions.
From ‘Safe Haven’ to Tactical Instrument
The increased participation of Chinese investors is not isolated. It reflects a broader search for investment alternatives within the Chinese economy, where the property market is in recession and deposit rates remain low. ANZ Research estimates that gold currently represents approximately 1% of Chinese household assets, a figure projected to rise to 5% in the near future. This perception of gold as a form of insurance is fueling demand, particularly given the downturn in property values.
At the same time, there is a strategic dimension. As part of a wider policy of de-dollarization, Beijing is strengthening its position in the gold market. Data from the U.S. Treasury Department shows that Chinese holdings of U.S. Treasury bonds decreased to $682 billion in November 2025, down 11% from the previous year.
Concurrently, the People’s Bank of China has been increasing its gold reserves for 15 consecutive months through January, reportedly reaching approximately 2,300 tons.
Bubble or New Normal?
The overall picture remains complex. Factors such as expectations regarding U.S. Interest rates and geopolitical tensions continue to support demand for precious metals. However, the scale of China’s involvement appears to be acting as a volatility multiplier.
The debate is now shifting from whether gold is a safe haven to whether the Chinese market is inflating a new speculative bubble. If borrowing continues to increase and regulatory interventions intensify, We see not impossible that subsequent moves will be equally pronounced – either upwards or downwards.
In any case, China demonstrates that it is not merely a major buyer of gold. It is, increasingly, the one seeking to set the tone in global markets.
