Chinese gold exchange-traded funds (ETFs) have experienced a surge, with holdings increasing by 92% since the beginning of 2023, according to Wells Fargo.
The bank said the surge in gold ETF investments reflects robust demand from Chinese investors seeking safety amid economic uncertainties.
Wells Fargo highlights that "Asian gold exchange-traded funds’ (ETFs’) holdings have grown 56% since January 2023," with 92% growth in China specifically.
This surge in gold holdings has coincided with a 23% return on gold over the same period. Furthermore, the substantial increase in Chinese gold ETF holdings is said to underscore a broader shift toward safe-haven assets as investors navigate economic challenges.
China's economic environment has been marked by weakness, particularly in the property sector, which has strained consumer confidence and limited investment opportunities.
Wells Fargo said that, as a result, gold has become increasingly attractive compared to underperforming Chinese equities and bonds. Year to date, gold has outperformed both the Shanghai Composite Index and the Bloomberg China Aggregate Bond Index, reinforcing its appeal to investors.
Wells Fargo attributes the rise in gold ETF holdings to this economic strain and anticipates that Chinese investors will continue to drive demand for gold. The bank's note suggests that the ongoing economic struggles and lackluster returns in other financial markets are propelling investors towards gold as a protective and profitable asset.
Looking ahead, Wells Fargo remains optimistic about gold prices, projecting a continued rise through 2025, with a year-end target of $2,400 to $2,500 per troy ounce.