Why China's going all in on gold and India isn't, says Financial adviser

Time of India

2 days ago

China is stepping up its gold game. As trade talks with the US remain uncertain and inflation lingers, Beijing has launched a sweeping financial strategy to shift its economic anchors from the US dollar to physical gold and the yuan.
This strategic shift was highlighted by Alok Jain, founder of Weekend Investing. In a recent post on X, Jain noted, 'China is encouraging citizens to hold more gold.' He added, 'They know gold has a future,' contrasting China's approach with India's restrictive stance on gold loans and high import duties.
— WeekendInvestng (@WeekendInvestng)
State-led push triggers surge in gold demand
In March 2025, China took a decisive step. The
China Banking and Insurance Regulatory Commission
(CBIRC) issued Directive No. 2025-03, which requires all insurance companies to invest at least 1% of their assets — over ¥4.5 trillion — into physical gold.
To enable this, insurers were granted access to the Shanghai Futures Exchange (SHFE), bypassing global trading platforms. This marks the first time insurance firms have been given such direct entry, according to SHFE.
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These moves build on a 2024 campaign by the People's Bank of China urging citizens to buy physical gold, which led to a 34% increase in national gold consumption year-on-year.
Behind the numbers: a two-decade build-up
China's gold accumulation isn't new. Since 2000, it has grown official
gold reserves
from 395 tonnes to over 2,200 tonnes. But some analysts believe Beijing holds more than 5,000 tonnes, much of it acquired through discreet, off-market deals.
The aim? Reduce dependence on the US dollar and cushion the economy against geopolitical shocks. And with global uncertainty rising, the plan seems to be gaining momentum.
India's gold story: rich in culture, light on policy
India, by contrast, remains heavily gold-dependent at the household level but lacks a coordinated national gold policy. Indian families, especially women, collectively hold more than 25,000 tonnes of gold — mostly in the form of jewellery.
But high import duties and restrictions on gold-backed lending limit broader financial leverage. While the cultural value of gold is high, its strategic utility remains untapped at the policy level.
Markets react to trade talks and tariffs
On Tuesday morning, MCX Gold August contracts rose 0.72% to ₹96,475 per 10 grams, reflecting cautious optimism surrounding
US-China trade talks
in London.
Reuters reported that US President Donald Trump had said his administration was "doing well" in the negotiations and received "positive reports from the talks".
But the details remain vague. A new framework agreement is in place, building on last month's Geneva discussions, yet both Trump and President Xi Jinping have yet to approve it.
'Any positive developments from the talks could provide headwinds for gold prices, while a stalemate in talks is likely to renew the precious metal's appeal,' said Zain Vawda, market analyst at OANDA.
Inflation, bonds and the dollar
Investors are also eyeing the US Consumer Price Index (CPI) data, due later today. Inflation is expected to stay sticky. A weaker dollar ahead of the data release has already helped lift gold.
Aksha Kamboj, Vice President of India Bullion and Jewellers Association, said, 'Market participants are closely monitoring the ongoing US-China trade negotiations taking place in London, alongside key inflation data set to be released this week in both India and the US.'
She added, 'Attention is also on the upcoming long-term bond auction in the US on Thursday; a weak response could spark renewed interest in gold at lower price levels.'
Can gold really hit $3,400?
Gold futures rose to $3,350.10 per ounce on Wednesday, while spot gold reached $3,329.70. Analysts see potential for further gains if inflation continues and trade talks stall.
'If it does not [fall], then a run toward the $3,400/oz level and beyond starts to look like a real possibility,' said Vawda.
Meanwhile, a US court ruling has kept Trump-era tariffs in place. These "liberation day" tariffs, set to kick in by early July, could add to inflation pressures and drive further interest in gold.
China keeps buying gold
In May, the People's Bank of China added 60,000 troy ounces of gold to its reserves. This marks the seventh straight month of additions, pushing total holdings to 73.83 million troy ounces.
This steady accumulation is a key reason why global gold prices may remain elevated in 2025.
Other metals feel the heat
While gold gained, silver futures fell 0.9% to $36.328 per ounce. Platinum surged 3.6% to $1,255.65, and copper dropped 1.4% on the London Metal Exchange.
In the US, copper futures also declined 2.3% amid concerns over high tariffs and slowing global demand.
Gold is back in the spotlight. China is betting big, not just on cultural affinity but on financial strategy. Trade talks, tariffs, and inflation data will shape the path ahead, but one thing is clear: gold is more than tradition now. It's a play on the future.
As Jain put it, "They know gold has a future."