Pilot program: Chinese insurers able to invest in gold for the first time

The price of gold is apparently taking a breather after its renewed record run at the start of the year, even though many analysts believe that the yellow metal could reach the USD 3,000 per ounce mark in 2025. However, an ounce of the precious metal still costs almost USD 2,900 and observers believe that these high prices could pose a challenge for the Chinese gold market.

This is because, the thinking goes, the still very high gold price could affect demand from private investors for gold bars and gold jewelry. However, the People’s Republic is likely to continue to play an important role in the gold market, as a new segment of the Chinese economy is set to participate there!

At the end of last week, Beijing launched a pilot program that allows insurance companies to acquire gold as an investment for the first time ever. As part of this pilot program, ten insurance companies will initially be able to invest up to 1% of their assets in gold. According to analysts, insurance companies could acquire up to 27.4 billion dollars in gold as a long-term investment in the future.

The initiative for the project came from the Shanghai Gold Exchange (SGE) and began years ago. Experts also emphasize that this is only one aspect of developments in the Chinese gold market. This will be driven less and less by private demand, they say, and will increasingly be recognized as a global financial asset.

Up to 7m oz of gold can be bought as part of the pilot program

The Chinese economy continues to grow – albeit not as strongly as many market participants had hoped – but experts say the government-supervised capital markets offer few opportunities for long-term investors. Overall, according to precious metals analysts, the decision to go ahead with the pilot project with insurers could potentially open the door for broader, institutional Chinese participation in the gold market, which could give the gold price another boost.

According to estimates, around 7 million ounces of gold could be purchased as part of the pilot program, even if this is unlikely to have any impact on the OTC (over-the-counter) markets, as insurance companies are likely to purchase the yellow metal via the SGE. Nevertheless, the program will also help to support the gold price.