China’s economy isn’t in a great place and its currency is floundering. The tumult is sending prices of gold, considered a safe-haven asset, skyrocketing.
Spot gold prices have recently hit record highs — above $2,400 an ounce — thanks to global demand on the back of economic and geopolitical uncertainties. Expectations of central bank interest rate cuts also boost gold’s appeal, since the yields on fixed-income assets like bonds typically fall as rates go down.
In China, consumers are dealing with an economy that is struggling to recover post-pandemic and a weak yuan that has fallen about 5% against the US dollar over the last year. This makes gold — which, like most internationally-traded commodities, is denominated in the US dollar on the global market — even more expensive for the Chinese consumer. But consumers and China’s central bank can’t get enough gold.
Even Gen Z investors in China are getting into the trend as they buy up tiny bottles of “gold beans,” Bloomberg reported last month. They’re looking for alternatives to China’s stock markets, which have been flailing over the last few years.
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