EquitiesFirst Financing Could Provide Strategic Flexibility as China’s Gold Strategy Reshapes Global Markets

Gold prices rose 34% from January to November 2024, reaching approximately $2,700 per troy ounce. While a variety of factors contributed to recent price increases, Chinese investment has been a key driver. According to the World Gold Council, the People’s Bank of China’s gold purchases in 2023 surpassed those of all other central banks combined. Chinese buyers have purchased more than 2,800 tons of gold from international markets in the past two years — a quantity that exceeds the total gold backing all exchange-traded funds worldwide.

For investors seeking to participate in this historic market transformation, equities-based financing like that offered by EquitiesFirst could create new pathways to access emerging opportunities while maintaining existing long-term portfolio positions.

China’s Gold Rush

Goldman Sachs Research analyst Lina Thomas projects the price of gold will hit $3,000 by the end of 2025, and the scale of the influence of Chinese demand in this growth seems clear. For example, the PBoC increased its gold reserves by 30% in 2023 alone, contributing to a total central bank acquisition of 1,037 metric tons globally that year.

Despite this influx of gold investment, there remains room for continued accumulation relative to the international community. The PBoC currently still holds just 4.9% of its reserves in gold  — a stark contrast to the U.S. Federal Reserve’s nearly 70% allocation.

The timing of its gold purchases coincides with China’s systematic reduction of U.S. Treasury holdings, which dropped from over $1 trillion in early 2022 to $768.30 billion in May 2024. This shift likely represents more than just portfolio rebalancing. It signals a strategic move toward financial independence from dollar-denominated assets, a position to watch as a Trump administration that has been adversarial to China in the past takes office again in 2025.

Market Impact and Investment Implications

The magnitude of Chinese demand has fundamentally altered market dynamics. While the PBoC briefly paused its purchasing in mid-2024 after 18 consecutive months of acquisition, Chinese retail investors have maintained steady demand. The country’s gold ETFs recorded their highest first-half inflows ever in 2024, reaching 17 billion renminbi (about $2.4 billion).

This sustained demand has come despite traditional market headwinds. Historical patterns suggest gold prices would decline during periods of rising interest rates, with demand for higher-yielding assets corresponding to rising rates. But this relationship has broken down in recent years. Between 2016 and 2019, gold prices rose even as interest rates climbed[10] , challenging conventional market wisdom. After holding in the face of traditional obstacles to increases in value, the price of gold could stand to benefit from the tailwind of expected decreases in interest rates in upcoming cycles.

China’s gold strategy gains additional significance when viewed through the lens of BRICS+ expansion. The economic bloc — which now includes Iran, Egypt, Ethiopia, Saudi Arabia, and the United Arab Emirates alongside its founding members of Brazil, Russia, India, China and South Africa — controls 17% of global central bank gold holdings. Their combined economic influence is substantial: 30% of global land mass, 40% of world population, and 54% of global gross domestic product.

This concentration of economic power, coupled with discussions of a potential gold-backed BRICS currency, adds another dimension to China’s accumulation strategy. The implications for global currency markets could be significant, particularly given the U.S. dollar’s declining share of global foreign exchange reserves over the past two decades.

Equities-Based Financing in a Shifting Market

While gold’s sharp price increases might suggest vulnerability to correction, the combination of geopolitical tensions, economic uncertainty, and structural changes in central bank demand creates a compelling case for strategic gold exposure.

The data suggests China’s influence on gold markets could persist. The PBoC’s current gold holdings remain modest compared to other major economies, indicating room for continued purchases. Meanwhile, Chinese retail demand has grown in recent years, supported by domestic factors including limited investment alternatives and ongoing property market challenges. Despite a slight downturn in demand from retail investors and jewelry buyers recently due to spiked prices, if the outlook is for long-term prices, demand could pick up again.

Goldman Sachs Research anticipates that any moderation in central bank purchases will likely be offset by increasing Western ETF holdings as interest rates decline. This dynamic, combined with China’s strategic imperative to diversify away from dollar-denominated assets, points to sustained upward pressure on gold prices.

The transformation of global gold markets reflects broader changes in the international financial system. For investors, understanding these structural shifts is crucial for portfolio positioning. Investors may look to alternative financing options to maintain strategic flexibility while participating in one of the most significant realignments of the global gold market in recent history.

Equities-based financing could provide the groundwork for a sophisticated approach to gold market participation. EquitiesFirst’s model allows investors to access liquidity by financing against their existing equity portfolios. Traditional methods of gaining gold exposure often require investors to liquidate existing positions — a potentially costly decision in terms of both transaction costs and missed long-term opportunities.

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