Gold Tops $2900 As China Pushes Insurance Companies Into Precious Metals

Hot on the heels of the People’s Bank of China’s (PBOC) recent resumption of official gold purchases (after a six-month pause), and amid ongoing economic turmoil domestically and trade-war threats geopolitically, Beijing has launched a pilot program  that allows insurers to buy gold for the first time could free up billions of dollars of investment in the metal, adding further impetus to a record-setting rally, hitting a new high (in USD) above $2900 this morning…

As Bloomberg reports, ten insurance firms – including PICC Property & Casualty Co. and China Life Insurance Co., two of China’s biggest – will be able to invest as much as 1% of their assets in bullion, in a program that became effective last Friday. 

That would translate into a potential 200 billion yuan ($27.4 billion) of funds, Minsheng Securities Co. said in a note.

The shift in policy in China could be a signal that authorities recognize the dearth of investment options in Asia’s largest economy, and the need for alternatives amid a property downturn and an economic slump.

“Insurance companies lack options for mid- and long-term assets with stable yields,” Guotai Junan Securities analysts led by Liu Xinqi said in a note, even though bullion typically doesn’t offer that.

The policy tweak makes gold the first commodity that Chinese insurers have been explicitly permitted to invest in. 

China has restricted insurance funds from taking positions in assets without “stable cash returns,” and limits the amount they can put into bonds and stocks.

As Jesse Colombo concluded earlier, all signs point to the potential for another explosive gold rally driven by Chinese demand, much like what unfolded last spring. With SHFE gold futures breaking out, the possibility of rising trading volumes, and the return of a Chinese gold price premium, the conditions for another bullish episode are falling into place. China’s economic crisis, record-low bond yields, and the looming prospect of massive stimulus only strengthen the case for gold’s continued ascent. Meanwhile, the PBOC’s renewed gold purchases, alongside this new insurance-gold-purchasing pilot program reinforce the broader shift toward gold as a preferred asset

If these factors align as expected, the next phase of this bull market could be even more dramatic than what we saw in 2024.