The cash flow into four major Chinese gold ETFs, including Huaan Yifu Gold ETF, has hit a record 7.6 billion yuan (equivalent to $1 billion) in just one week, according to Bloomberg calculations. Notably, the trend of pouring money into ETFs continued this week.
The move by Chinese investors comes amid concerns about trade tensions between the largest economies that have shocked the global market, and gold is considered a safe investment channel.
The investment fever comes after US President Donald Trump announced a strong tax, causing thousands of billions of USD to evade from the global stock market and raising concerns about recession.
When President Donald Trump warned of a 50% increase in tariffs if China did not end retaliatory measures, Beijing said it would "fight to the end".
In China, gold is already popular and is considered a jewelry of cultural significance. However, more and more individual investors are viewing gold as a hedge against risk amid uncertainty. The two large fund management companies said that most of the recent cash flow has come from individual investors.
Although the scale is considered small compared to major markets in the world, gold ETFs in China are growing rapidly. Since the beginning of the year alone, investment in gold ETFs in China has reached 80% of last year.
If this trend continues, Chinese ETFs could start to have a sideways impact on funds in developed markets, said Michael Hsueh, a precious metals analyst at Deutsche Bank.
World gold prices have had a strong increase this year due to the impact of trade and geopolitical tensions. Gold has continuously hit new peaks, attracting cash flow from ETFs and central banks.
Although gold prices have decreased slightly when investors sell to make up for losses in other markets, overall gold has increased by more than 13% this year.
Industry experts say that gold prices are still forecast to have room to continue to increase.
When the macro situation is unstable, cash flow tends to flow into gold and bonds to reduce risks. A part of the money that should have been poured into stocks has been shifted to gold, said Yu Yingdong, managing director of Cowin Asset Management Company in Shenzhen.
In March, Chinese ETFs were withdrawn about 5.3 billion yuan ($722 million) in shares, showing a clear shift to safe-haven assets, according to Bloomberg's summary data.
