How China’s ‘unruly’ speculators might be fueling the frenzy in gold market

Gold’s wild price swings in recent weeks are increasingly being linked by some analysts to speculative trading in China; US Treasury Secretary Scott Bessent attributes the increased volatility to “unruly” Chinese activities.

Gold prices rose to a record high of $5,594 per ounce on January 29 and fell nearly 10% the next day, the sharpest decline in decades. Since then, the yellow metal has struggled to consistently stay above the 5,000 level.

As broader factors such as US interest rate expectations and geopolitical tensions continue to drive bullion demand, some analysts believe Chinese retail and institutional investors are playing an outsized role in driving up volatility.

Speaking on Fox News’ Sunday Morning Futures show, Bessent described the move clearly. “The gold rush thing, things have gotten a little bit out of control in China… They have to tighten margin requirements. So gold looks like a classic, speculative boom to me.”

Market observers noted that gold’s choppy trading was driven by increased activity in gold futures and exchange-traded funds and increased use of leverage despite repeated margin increases.

Nicky Shiels, head of research and metals strategy at MKS Pamp, said China was the “dominant driver” influencing precious metal prices this time.

“This has been driven by a mix of retail and institutional speculative inflows through ETFs, physical bars and futures positioning,” he told CNBC.

China’s gold-backed ETF holdings have more than doubled since the beginning of 2025, while gold futures trading has risen sharply in recent months, according to data provided by Capital Economics.

“This [volaitilty] “This is partly due to increased access to gold-linked financial products such as futures contracts and exchange-traded funds (ETFs) in China,” said Capital Economics economist Hamad Hussain.

Ray Jia, former head of APAC research for India and vice president of trade affairs for China at the World Gold Council, told CNBC that volumes on the Shanghai Futures Exchange have increased, with the year-to-date average approaching 540 tonnes per day. This increase is based on a record average daily trade volume of 457 tons in 2025.

Regulators took notice as the Shanghai Gold Exchange continually increased margin requirements to stem rising volatility.

“The increasing use of leverage to invest in futures contracts and gold is not typical for investors seeking a safe-haven asset,” Hussain said, warning that the latest buying “signals that a speculative bubble may be inflating.”

From safe haven to speculative trading?

The increase in participation reflects both structural concerns and tactical positioning.

ANZ Research’s senior China strategist Zhaopeng

Gold currently accounts for about 1% of household assets in China, according to data from ANZ Research. Xing expects this figure to rise to 5% “in the near future,” especially amid stagnant property prices and deposit rates near historic lows. “People believe gold can play an insurance role.”

He also stated that for Beijing, this justification is strategic in an environment where there is a broader move away from the dollar.

“The government is pushing dedollarization to protect themselves from US economic pressure,” said Shaun Rein, founder and managing director of China Market Research Group.

“Chinese retail investors and the government are driving up gold prices as they seek higher returns and safe havens,” he said.

According to official data released by the US Treasury Department, China’s US Treasury assets decreased to $682 billion in November 2025. It decreased by 11% annually. Meanwhile, the People’s Bank of China reportedly increased its gold reserves for 15 consecutive months through January. increasing assets to approximately 2,300 tonnes.

“Apart from the flight to safety, there could also be an inflating gold bubble in China,” said Hussain of Capital Economics.