Recent erratic price fluctuations in gold are increasingly attributed to speculative trading in China by various analysts, with U.S. Treasury Secretary Scott Bessent attributing the increased volatility to “chaotic” activities in China.
Gold prices surged to an unprecedented high of $5,594 per ounce on January 29, only to fall nearly 10% the following day in its most significant drop in decades. Since that time, the precious metal has struggled to remain consistently above the 5,000 mark.
While wider factors such as expectations for U.S. interest rates and ongoing geopolitical tensions continue to influence bullion demand, some analysts suggest that Chinese retail and institutional investors are playing an oversized role in driving volatility.
Bessent, who appeared on Fox News’ Sunday Morning Futures, characterized the shift plainly. “The gold market seems to be a bit chaotic in China … They are having to increase margin requirements. So gold appears to me as a classic, speculative blowoff.”
Heightened activity in gold futures and exchange-traded funds, alongside a growing use of leverage despite ongoing margin increases, is seen as contributing to gold’s erratic trading, according to market analysts.
Nicky Shiels, head of research and metals strategy at MKS Pamp, stated that China has been the “primary factor” influencing prices of precious metals at this time.
“This has been driven by a combination of speculative inflows, both retail and institutional, through various channels including ETFs, physical bars, and futures positioning,” she explained to CNBC.
Holdings in Chinese gold-backed ETFs have more than doubled since early 2025, according to data from Capital Economics, with a notable increase in gold futures trading activity in recent months.
“This [volatility] is partly due to improved access to gold-linked financial instruments like futures contracts and exchange-traded funds (ETFs) within China,” remarked Hamad Hussain, economist at Capital Economics. “Additionally, there are indications of rising leverage in China’s gold market, which can result in considerable fluctuations in gold prices.”
Trading volumes on the Shanghai Futures Exchange have surged, with year-to-date averages nearing 540 tons per day, according to Ray Jia, research head for APAC ex-India and trade engagement deputy head for China at the World Gold Council, who shared this information with CNBC. This increase builds upon the record trading volume in 2025 of an average of 457 tons per day.
Regulators have taken note, leading the Shanghai Gold Exchange to repeatedly elevate margin requirements to address the increased volatility.
“The increasing utilization of futures contracts and leverage for investing in gold is not typical behavior for those seeking a safe haven asset,” Hussain stated, cautioning that the recent buying practices “suggest a potential speculative bubble is inflating.”
From safe haven to speculative trade?
The surge in participation demonstrates both underlying anxieties and tactical maneuvers.
“Chinese individuals face limited access to financial markets. They must invest in real estate, deposits, etc. Gold serves as an attractive alternative when housing prices decline and deposit rates remain low at 1%,” noted Zhaopeng Xing, senior China strategist at ANZ Research.
Currently, gold accounts for approximately 1% of Chinese household assets, based on data from ANZ Research. Xing anticipates this proportion will rise to 5% in the near term, particularly as real estate prices remain depressed and deposit rates linger near historical lows. “There is a belief that gold can provide a form of insurance.”
For Beijing, the motive is also strategic in the context of a broader aim to reduce reliance on the dollar, he added.
“The government is pursuing de-dollarization to shield themselves from economic pressure from the U.S., according to Shaun Rein, founder and managing director of the China Market Research Group.
“Chinese retail investors and the government are propelling higher gold prices as they seek better returns and safe havens,” he stated.
As per official data from the U.S. Treasury Department, China’s U.S. Treasury holdings dropped to $682 billion in November 2025, a decrease of 11% year on year. Meanwhile, the People’s Bank of China has been increasing its gold reserves for 15 consecutive months up to January, reportedly raising holdings to about 2,300 tons.
Capital Economics’ Hussain noted, “In addition to the quest for safety, there may also be a gold bubble forming in China.”
