China has launched a pilot program allowing insurers to invest in gold for the first time, potentially unlocking billions of dollars in new investments in the precious metal. A Bloomberg report highlighted that the move could further bolster gold prices, which have recently reached record highs.
Under the new policy, 10 insurance firms – including leading companies PICC Property & Casualty Co. and China Life Insurance Co. – can allocate up to 1% of their assets to bullion. This shift, effective as of last Friday, could translate into an estimated 200 billion yuan (US$27.4 billion) in gold investments, according to a report from Minsheng Securities Co.
Gold has been one of the strongest-performing commodities in recent years, driven by factors such as interest rate cuts by the US Federal Reserve and substantial purchases by central banks, including China’s. Additionally, policy shifts in the US, particularly under the second term of US President Donald Trump, have influenced global markets, prompting traders to adjust their strategies in response to potential disruptions in trade policies.
Bloomberg noted that the change in China’s investment policy may signal a response to limited investment options in the country amid economic challenges. With China experiencing a property downturn and an overall economic slowdown, authorities may be seeking alternative assets for stability.
“Insurance companies lack options for mid- and long-term assets with stable yields,” analysts at Guotai Junan Securities, led by Liu Xinqi, told Bloomberg. While gold traditionally does not offer consistent cash returns, it is now the first commodity explicitly permitted for insurance investments in China. Previously, Chinese insurers were largely restricted to assets with stable income streams, such as bonds and stocks.
Despite the potential influx of funds, demand from insurers may not be immediate.
“We are more likely to see accumulations when price rallies take a pause,” said Yuxuan Tang, a global market strategist at JPMorgan Private Bank. Institutional investors, including insurers, tend to be price-sensitive due to their focus on returns, she added.
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