Shanghai Gold Premium Hits 12-Month High as China-US Trade War Worsens
Tuesday, 4/08/2025 15:36
The GOLD PRICE in top consumer China leapt on Tuesday relative to global bullion quotes, hitting the highest premium in Shanghai over London prices in almost 12 months as Beijing vowed to "fight to the end" against US President Trump's trade tariffs and also announced that its sovereign wealth fund is actively buying shares to backstop the value of Chinese corporations.
With London bullion creeping $10 per Troy ounce back above
$3000 gold, the Shanghai and Shenzhen stock market rallied 1.7% and Hong Kong bounced 1.5% from yesterday's 13% plunge.
Tokyo and Europe recovered faster however, adding 6.3% and 3.5% respectively while New York's S&P500 opened with a 3.7% rebound, cutting its 1-week loss to 5.9%.
Trump yesterday threatened to double US tariffs on Chinese goods after Beijing said it will match the rates for
'reciprocal' US trade tariffs announced last Wednesday.
"That is a mistake on top of a mistake," said a politburo spokesman. "China will never accept this...China will fight to the end."
Gold kilobars traded on the Shanghai Gold Exchange today rose to ¥718 per gram, rallying 0.3% from Monday's near 2-week low. Still 3.5% below Thursday's record high, that was equivalent to a Dollar price of $3047 per Troy ounce, doubling the Shanghai premium over London bullion-market quotes from $20 per ounce to more than $40.
Coming even as the Yuan dropped to a 19-month low on the FX market, that likely reflects strong and rising demand in gold's No.1 mining, importing and consumer nation.
Today's Shanghai premium − the largest since last April's
China "gold frenzy", and effectively the gross incentive for banks to buy London gold and fly it to China − was more than 5 times the past decade's typical level and 10 times the prior 2025 year-to-date average.
"The Chinese economy is an ocean, not a small pond," said China's President and Communist Party general secretary Xi Jinping.
The world's 2nd largest economy "in spring is
full of vitality in its mobility and busy-ness, bringing together a vibrant economic picture," says the China Daily, reporting a boom in tourism and retail spending during last weekend's Qingming Festival.
Alongside reports of strong retail investment and jewellery demand,
gold ETF investment through trust funds primarily listed in China or Hong Kong expanded in March for the 9th time in 12 months, new data said Wednesday from the mining industry's World Gold Council.
More than doubling in size since last March to need 138 tonnes of bullion backing, those Chinese ETFs still account for less than 4.5% of the sector's global total.
Gold-backed ETFs worldwide enjoyed their 3rd consecutive quarter of net inflows between January and March, expanding by 7.0% to need an additional 226 tonnes of bullion.
That was the strongest growth by weight in gold ETFs since Russia's all-out invasion of Ukraine began in Q1 2022.
Buying gold for its official reserves yet again in March, the People's Bank of China today said "it firmly supports" the moves by Central Huijin Investment Ltd − an arm of China's sovereign wealth fund − to support China's stock market by
buying A-share index funds during Monday's dramatic plunge, and will lend to the fund "when necessary to resolutely maintain the steady operation of the capital market."
While Shanghai's CSI300 stock index has lost 5.0% so far this year in US Dollar terms, New York's S&P500 has dropped 13.7%.
Western Europe's top corporations have meantime added 1.7% since the start of 2025 when the EuroStoxx 600 index is adjusted into US Dollar terms.
London gold in UK Pounds today erased all of Monday's 2.3% plunge to 3-week lows, trading back at £2360 per Troy ounce, while the price in Euros rallied to €2760, almost €60 above yesterday's 4-week low but 5.2% off 1st April's fresh record high.
Silver meantime held onto its $2 rally from Monday's plunge to 7-month lows beneath $28.35 per Troy ounce, cutting its April-to-date loss to 10.5% in US Dollar terms.
"Iran cannot have a nuclear weapon," Trump said when meeting Israeli Prime Minister Netanyahu on Monday, telling reporters that if talks being held between Tehran and Washington this week "aren't successful, I actually think it'll be a very bad day for Iran."
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