The price of gold has broken record after record this year. But it's the nature of that surge that's caught people's attention. It's basically flown against all the rules in the macroeconomic playbook. It's led some people to scratch their heads.

People wonder if there's a big mystery buyer in the market because it really doesn't make sense. One country has been key to why gold's value has soared. This bar is around 100 grams and is worth around $10,000. This has revealed just how nervous Chinese consumers are.

So what's driving this in 2024? And will it last? I have never seen their desire to hide their wealth away from somewhere as strong as now. As a bit of a primer, it's worth quickly looking at just how much gold actually exists.

The finite quantity and near indestructibility of gold underpins its value. About 212,000 tons have been mined from the Earth, it's estimated. Almost half of that is in jewelry. Most of the rest is in bars and coins

in banks or private vaults around the world. It's harder to imagine a safer asset than gold. It's a heavy thing. The logistics of even moving and stealing it, seizing it... it requires a lot of logistical thinking and legwork.

It's one way gold earned a reputation for being a haven from volatility. Gold isn't like the US dollar. The US can seize and freeze your US dollar assets very easily. We saw that in 2022. And that particular episode

is really influencing the way a lot of the emerging market world thinks about how to allocate their reserves and stay safe in a world where, at this point, who knows what's next. In the first half of 2024, the war in Ukraine and the Middle East,

as well as the prospect of lower US interest rates, all nudged the price up. So who's been driving gold prices in 2024? First, central banks. They've been buying up quite a lot of gold, hoovering it up really in the last two years.

You've had analysts from Goldman Sachs pointing to emerging market central banks as being the real driver behind gold's incredible rally this year. In fact, it's been the dominant driver of the upward gold move since 2022. The moment that Russian financial assets were blocked,

then that sparked a lot of concern from a lot of emerging markets and China in particular, that who knows, this might happen to them one day. The People's Bank of China embarked on an 18-month buying spree in 2023 and 2024,

purchasing gold to diversify away from US dollars as tensions with America grew. The central bank now sits on nearly 2300 tons. Which brings us to the other driver pushing up gold's price: China's retail market.

When you buy traditional Chinese gold jewelry, you're not just buying the design. You're quite literally buying its weight in gold. This is Chinese bangle. Normally, in the tradition, the parents, the grannies, the family will pass this Chinese jewelry down

to the next generation. So they pass it on to you as a gift, to give you a blessing. And at the same time, it's more like passing on some tangible assets to the next generation as well.

It is a tangible representation of wealth. As Chinese consumers joined the rush earlier in the year, gold's value accelerated even more. Social media was awash with hype. China is now the world's biggest retail buyer of gold,

purchasing over 1000 tonnes in 2023, mostly in jewelry. But Chinese gold demand hasn't been driven by people having extra cash – quite the opposite. China’s economy is struggling. Why does this market keep faltering?

A volatile local stock market, limited investment options, and a persistent property crisis are dragging down the Chinese economy. Over the last three years, China's property market has been battered. Homes were a key store of value for many Chinese.

As the crisis has dragged on, billions have been wiped off household wealth. Government figures have shown at least 380 million square meters of excess housing in China; that's equivalent to the size of Detroit. And despite Beijing unveiling its biggest package yet

to reduce borrowing costs, prices have continued to slump. In the last 20 or 30 years, I haven't seen, in a general sense, the Chinese population so wary about the future, the economic future. Anxiety lingers about jobs,

wages and what lies ahead for China. And I have never seen their desire to hide their wealth as strong as now. Evidence of China’s changing consumption of gold can be found here in Shenzhen’s Shuibei Market.

Nearly 14 billion US dollars of gold was sold here in 2023, but by this fall, things had changed. In October, gold's prices peaked just shy of $2,800, an all-time high.

Chinese jewelry buyers said enough is enough. Sales collapsed. So I talked to my old friends to get an idea of what has been happening in the Chinese jewelry gold market recently. They told me the sales in October were so bad that

the whole Shuibei area only sold one tonne of gold in October. In a normal month, gold sales are between 20 and 40 tonnes, even in a weak season. Chinese consumers helped push gold's price so high,

they were priced out of the jewelry they'd been buying. At the same time, those with wealth bought gold bullion, helping nudge gold's value to a record high. But why is this happening? Who's buying at this price?

I think one of the most interesting things about gold right now is that you're seeing a lot of demand for physical bullion. There are cost of carry charges associated with physical bullion, and you have to pay storage fees as well.

So if you're willing to take on those extra costs just to have a physical piece of bullion in your ownership, I think that suggests there are deeper underlying concerns about where the world is headed. Sales of bars and coins are up nearly 30 percent this year.

It all links back to anxiety. Gold is seen as the safest place to store your wealth, even when prices are this high. From time to time, I always share conversations with my friends in China. Some of them are very wealthy,

they're working across various different industries; some in mining, some in jewelry, some in batteries, some in EVs. So, like, across all different industries. And a common sentiment that I get from them is they don't feel hope for the future.

People are actually getting less comfortable and want to do something to protect their own wealth. Producer: And they what? They turn to gold? They buy physical gold bars, but obviously they are not going to store it in a bank because they will be found out.

So, like, they store it in their own place. Despite fluctuations, gold remains at a near-record high, and the trend since the millennium shows its journey. If fear and instability have underpinned the rally, then 2025 will see it continue.

The incoming Trump administration has threatened Beijing with 60% tariffs. Truth Social messages—at least two of them—laid out his plan, on day one, for tariffs. And, you know, we all know that Donald Trump says he loves that word, 'tariffs'.

A potential escalation of US-China trade tensions could threaten already weak Chinese growth and upend global markets. You're going to have central banks look at Trump and potentially what could be erratic foreign policy and get a little more concerned about the safety of their reserves

and their assets. And in that context, gold makes a lot of sense.

What Gold’s Crazy Run Says About China

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Bloomberg Originals

Record Gold Prices and the Mystery of Increased Demand

Gold prices have reached record highs, defying macroeconomic predictions.

China's role is significant in the surge of gold's value.

The question of what is driving the increase in demand in 2024 is posed.

Gold's finite quantity and indestructibility contribute to its value.

Factors Influencing Gold's Value: Geopolitical Instability and Economic Uncertainty

Gold is seen as a safe haven from volatility, unlike easily seized US dollar assets.

The war in Ukraine and the Middle East, and the prospect of lower US interest rates, contributed to the price increase.

Central banks, particularly emerging market ones, have been significant buyers of gold.

The blocking of Russian financial assets increased concerns among emerging markets, especially China.

China's Role: Central Bank Purchases and Retail Market Demand

China's central bank engaged in a significant gold-buying spree to diversify away from US dollars.

China's retail market, with its tradition of gold jewelry as a store of value, further boosted demand.

Traditional Chinese gold jewelry is passed down through generations, representing tangible wealth.

China is the world's largest retail buyer of gold, purchasing over 1000 tonnes in 2023.

China's Economic Struggles and the Shift in Gold Consumption

Despite economic struggles, Chinese consumers' gold demand increased, driven by anxieties about the economy.

A volatile stock market, limited investment options, and a property crisis weakened the Chinese economy.

Anxiety about jobs, wages, and the future fueled a strong desire to protect wealth through gold.

Shenzhen's Shuibei Market shows a shift in gold consumption: from jewelry to bullion.

In October, gold prices peaked, leading to a collapse in jewelry sales in Shuibei.

High prices priced out many jewelry buyers, while those with wealth shifted to gold bullion.

Increased demand for physical bullion suggests deeper concerns about the future.

Conversations with wealthy Chinese individuals reveal a lack of hope for the future and a desire to protect wealth.

Future Outlook: US-China Relations and Gold's Potential

A potential escalation of US-China trade tensions could further impact the Chinese economy.

Central banks might become more concerned about the safety of their reserves, increasing gold's appeal.