Gold price rally: Trade war woes drive Chinese investors back to yellow metal, fueling record-breaking prices

Rising tensions between China and the U.S. may once again be pushing Chinese investors toward the safety of gold. After months of strong inflows into equities—fueled by Beijing’s aggressive stimulus push and a tech-led rally—the resurgence of trade frictions has introduced fresh uncertainty, prompting investors to reconsider safer assets like gold.

According to analysts, the price premium for gold in China, the world's top consumer, widened last week as both investors and consumers sought refuge amid escalating trade tensions with the United States.

The escalating tensions have also led the Chinese currency, the yuan, to touch a low last seen in 2007 against the U.S. dollar last week, and it slipped to a 19-month low against the currencies of its major trading partners, encouraging gold buying in Asia's largest economy.

Apart from Chinese investors and consumers, the country's central bank—which has been at the forefront of gold buying among major global central banks in recent years—extended its gold-buying spree into March.

In March 2025, the People's Bank of China (PBoC) continued its gold accumulation for the fifth consecutive month, increasing its reserves by 0.09 million troy ounces. This brought China's total gold holdings to approximately 73.7 million troy ounces by the end of March, according to Bloomberg.

As demand from China continues to surge, gold prices have been breaking record after record, with spot prices hitting a new peak of $3,245 per troy ounce in today's session.

The prices have already jumped 23% in less than four months of 2025, building on a 27% gain in 2024.

Will gold demand rise to new peak?

Since late 2024, Beijing has unveiled a series of economic support measures, from interest rate cuts to targeted liquidity infusions, which spurred a rebound in Chinese stocks. The CSI 300 index rose over 26% between September 2024 and March 2025, attracting both domestic and foreign investors who saw Chinese equities as undervalued compared to their Indian or U.S. counterparts.

The optimism was further bolstered by the rise of homegrown tech champions like AI startup DeepSeek, which gained attention as China’s answer to ChatGPT. This helped restore confidence in the long-underperforming market.

However, the sentiment took a hit when U.S. President Donald Trump returned to the tariff playbook, imposing steep duties on Chinese imports. With both countries now locked in another round of retaliatory trade actions, Chinese stocks have begun to slide again, reviving concerns about economic stability and global demand.

As per analysts, these renewed tensions are prompting investors and consumers back to gold—an asset that has historically been a haven during geopolitical and market uncertainty. Already, Chinese investors have shown a growing preference for gold in recent years, particularly after the COVID-19 pandemic.

As the country’s real estate sector—the backbone of household wealth—struggled to recover, many turned to gold bars, coins, and ETFs as a store of value.

With market volatility returning and economic risks rising, analysts believe the case for gold may strengthen once again if U.S.-China trade tensions escalate further.

Meanwhile, the Chinese government has made consumer spending its topmost priority. In a parliamentary session in Beijing in early March, Chinese Premier Li Qiang promised to vigorously boost domestic consumption as the country set a 5% growth target.

This year, China has raised its budget deficit to 5.66 trillion Yuan ($780 billion) or around 4% of gross domestic product, the highest level in almost 3 decades, as per the latest media reports. If consumer demand resumes in the world's second-largest economy, it will also support continued demand in yellow metal.

Short-term relief from Washington

Donald Trump on Friday issued exemptions for Chinese-made semiconductors and electronics, amid warnings that U.S. consumers could face skyrocketing prices on products such as smartphones and laptops.

The new exemptions are expected to benefit U.S. tech companies like Nvidia and Dell, as well as Apple, which manufactures iPhones and other premium products in China.

Earlier, Beijing’s Commerce Ministry said Friday’s move “represents only a small step” and insisted that the Trump administration should “completely cancel” its entire tariff strategy.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.