Why Many Hedge Fund Managers Are Turning to Gold
China began updating its gold reserve figures on a monthly basis in July 2015. Before that, the reserve figures were not updated regularly. As per China’s central bank, the Chinese gold reserves stood at 58.1 million ounces at the end of April, up from 57.8 million ounces at the end of March.
China has been the biggest consumer market for gold for ages. However, India often presents fierce competition to the Chinese counterpart regarding buying capacity. Even with such a massive surge in the price of precious metals, China seems to have a firm hold on gold. The below chart shows the relationship between the yuan and gold prices.
The new yuan-fixed gold is also helping investors in the country to invest efficiently in gold. The initiative by the Chinese government is likely to provide additional stimulus to the already prevalent demand. One of the most important features about the new benchmark is that it’s not set to follow price fluctuations in London or New York.
According to the World Gold Council data, China’s current gold holdings of 1,762.3 metric tons comprise just 1.8% of the country’s reserves while India’s 557.7 metric tons of gold holdings make up 5.4% of its reserves. Even with the current high price of gold, the consumption pattern may take a leap as China’s central bank may look to increase its current reserve percentage of gold.
The fluctuations in gold prices can also be seen in funds like the Physical Swiss Gold Shares (SGOL) and the PowerShares DB Gold Fund (DGL). These two funds have jumped 19.9% and 20.1% year-over-year, respectively.
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