The Chinese are piling into gold as stocks falter and the property market crumbles

• China's stock market slump has sent investors, households, and central banks on a bullion binge, FT reported.
• Investment in gold bars and coins in China grew 28% to 280 tonnes in 2023, the World Gold Council said.
• The rush to the safe haven asset points to uncertainty around China's financial health.

China is on a bullion binge.

Investors, households, and central banks are all piling into gold, a safe haven asset, as the country's stock market and property sector continue to gyrate, the Financial Times initially reported.

According to a quarterly report from the World Gold Council (WGC), China's investment in gold bars and coins grew 28% to 280 tonnes in 2023. In the global jewelry market, China accounted for a 17% increase in demand for gold.

If you look at the gold market globally, demand has been falling: the WGC saw demand slip 5% to 4,448 tonnes in 2023 after a strong 2022. But China seems to be going the other way, with both individuals and the government itself purchasing the precious metal.

Chinese central banks have continued their gold-buying spree, helping gold prices surge past the key $2,000 per ounce mark. Total withdrawals from the Shanghai Gold Exchange rose 7% year-over-year in 2023 to 1,687 tonnes of gold. And Chinese gold ETFs saw sizable inflows as investors sought safety in the commodity.

"Gold's attractiveness was further boosted by the increasing need of households to preserve value: the local gold price's outstanding performance drew their attention when the currency and other Chinese assets weakened," a separate January WGC report found.

The rush toward the safe haven asset marks the uncertainty around China's financial health. China's market mayhem has dragged the benchmark CSI 300 stock index down 5% this month alone and 23% over the past year. In the struggling real estate sector, the Evergrande debt saga continues, with Beijing trying to stem the fallout with a "cure kit."

The Chinese economy has also been sluggish post-COVID, with the country now struggling to stave off deflation, plug the foreign investment hemorrhage, and arrest a stock market slump.

By the end of 2023, foreign investors had sucked 90% of the money they invested in Chinese stocks right back out. Even Chinese investors are so sick of the rout they've poured money into Japanese stocks.