Has the Q2 Theme for Gold Changed? The Chinese Market Is the Key Longs Moving Forward

Gold has been one of the strongest performing assets this year, with international gold prices surpassing $3,200 per ounce, underscoring the heavy risk-averse sentiment in the market.

On Monday, as US President Trump temporarily exempted tariffs on smartphones, computers, and other electronic products, market sentiment slightly recovered, leading to a slight decline in gold prices. However, Peter Grant, senior metals strategist at Zaner Metals, emphasized that ongoing uncertainties in trade and tariffs, a weak US dollar, and declining US Treasury yields will continue to support gold.

Amid concerns about the US economy, investors are selling US Treasuries, which has also triggered additional purchases of gold. US Treasuries are usually another favorite of risk-averse investors, but now more people are choosing to trust gold.

Robert Yawger of Mizuho Securities also stated that the single-day decline in gold is unlikely to become a short-term trend, as it will attract sufficient risk-averse funds and continue to consolidate near historical highs.

China's Gold Rush

On the other hand, according to data from the World Gold Council, as of April 11, ETF investments flowing into China's physical gold exchanges this month reached 29.1 mt, exceeding the 23.5 mt for the entire Q1 and the 27.8 mt inflow in the US in April.

John Reade, senior market strategist at the World Gold Council, pointed out that if the rise in gold prices in Q1 was mainly due to US tariffs and Western ETF buying, the theme of the rise in Q2 may be entirely different, driven by a surge in interest from Chinese investors.

Statistics show that the total size of the 14 gold ETFs in the Chinese market has now exceeded $120 billion, an increase of over 70% since the beginning of the year. Wind data shows that the siphon effect of leading gold ETFs is evident, while small and medium-sized gold ETF funds have doubled in size this year.

At the same time, gold futures on the Shanghai Futures Exchange have also entered a strong upward trend with active trading, and domestic gold prices have been higher than international spot prices, indicating that the bullish sentiment among Chinese investors is intensifying.

Image source: Jesse Colombo's report

Independent analyst Jesse Colombo stated that last spring's gold bull market was mainly driven by the Shanghai Futures Exchange, while Western markets were largely on the sidelines at the time, and now similar signs are emerging in China's trading.

He emphasized that the market tone has changed dramatically, indicating that the anticipated Chinese gold rush has begun and is likely to push gold prices to levels that will shock most people.