Gold market analyst Jan Nieuwenhuijs has recently examined the state of the precious metal market, revealing a significant surge in gold prices owes much to the dual engines of demand: the private market and the People’s Bank of China (PBOC).

According to Nieuwenhuijs, the Chinese private sector’s gold imports accounted for 543 tons in the first quarter of the year, a figure that was built upon by the country’s central bank, which added 189 tons to its reserves over the same period.

Private gold demand in the country represents a 74% increase from the last quarter of 2023, while the People’s Bank of China’s accumulation rose 38% from the preceding quarter.

Both of these factors helped the price of the precious metal hit a new all-time high and surpass the $2,450 mark for the first time in history. It then enduring a slight correction to now trade at $2,340.

Gold Price Chart via TradingView

Data shows that gold demand from central banks in the first quarter of the year was 290 tons, with the People’s Bank of China making up for the majority of that figure as it boosted its reserves to 5,542 tons, according to the analyst.

These acquisitions, according to analysts, are being made as China moves away from its U.S. debt holdings in a bid to be less reliant on fiat currency foreign reserves after the European Union blocked €200 billion ($around $216 billion) worth of Russian central bank assets after the country launched its invasion of Ukraine.

Private demand for gold in the country, according to the New York Times, is coming from consumers who have been buying and collecting small “gold beans” as an affordable way to invest in the precious metal.

In China the precious metal has been an attractive investment alternative amid a slump in traditional options like real estate and equities. The analyst wrote:

The Chinese public, which doesn’t have many investment options due to capital controls, will continue to invest in gold and support the price.

Nieuwenhuijs predicts that the gold market will remain red-hot, citing reports that Beijing has recently sold $53 billion worth of US Treasuries and agency bonds in a move that will further strengthen gold as a safe haven amid rising geopolitical tensions.

Featured image via Unsplash.