Gold and silver prices rose as retail sales growth slowed in December, pushing U.S. Treasury yields lower and suggesting a weakening economy ahead of key jobs data.
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Gold’s wild price swings in recent weeks have been linked by some analysts to Chinese speculative trading, with US Treasury Secretary Scott Bessent saying the increased volatility was due to “uncontrollable” Chinese activity.
Gold prices soared to a record high of $5,594 an ounce on January 29, but plunged nearly 10% the next day, the steepest decline in decades. Since then, Yellow Metal has struggled to consistently climb above the 5,000 level.
While broader factors such as U.S. interest rate expectations and geopolitical tensions continue to drive bullion demand, some analysts believe Chinese retail and institutional investors are playing a larger role in the rise in volatility.
Speaking on FOX News’ Sunday Morning Futures, Bessent candidly explained the move. “In terms of gold movements, things are getting a little out of hand in China. Margin requirements need to be tightened. So gold looks to me like a kind of classic, speculative blowout.”
Market watchers agreed that a surge in activity in gold futures and exchange-traded funds (ETFs) and increased use of leverage despite repeated margin hikes appear to be behind gold’s volatile trading.
Nikki Shields, head of research and metals strategy at MKS Pump, said China was the “key driver” influencing precious metals prices this time around.
Gold price in the past year
“This increase is being driven by a combination of speculative inflows from retail and institutional investors through ETF, spot and futures positioning,” he told CNBC.
China’s gold-backed ETF holdings have more than doubled since the beginning of 2025, and gold futures trading activity has picked up rapidly in recent months, according to data from Capital Economics.
“Part of this (volatility) is China’s increased access to gold-linked financial products such as futures contracts and exchange-traded funds (ETFs),” said Hamad Hussein, an economist at Capital Economics. “Furthermore, there are signs of increased leverage in the Chinese gold market as well, which could lead to significant volatility in gold prices.”
Trading volumes on the Shanghai Futures Exchange have soared, with the year-to-date average approaching 540 tonnes per day, Lei Jia, head of Asia Pacific (India) research and deputy head of China trade engagement at the World Gold Council, told CNBC. This increase builds on record trading volumes averaging 457 tonnes per day in 2025.
Regulators have taken note, and the Shanghai Gold Exchange has repeatedly raised margin requirements to curb rising volatility.
“The increased use of futures contracts and leverage in investing in gold is not typical of safe-haven investors,” Hussein said, warning that recent buying “suggests that a speculative bubble may be expanding.”
From safe haven to speculative trading?
The surge in participation reflects both structural anxiety and tactical positioning.
“Chinese people have limited access to financial markets. They have to invest in things like real estate and deposits. When house prices fall and deposit rates are as low as 1%, gold is a good alternative,” said Chapeng Xin, senior China strategist at ANZ Research.
Gold now accounts for about 1% of China’s household wealth, according to data from ANZ Research. Singh expects this rate to rise to 5% in the near future, especially amid depressed property prices and deposit rates hovering near historic lows. “People believe that gold can act as insurance.”
He pointed out that for the Chinese government, the motivation is also strategic as it moves away from the dollar.
“The government is pushing for de-dollarization to protect itself from economic coercion from the United States,” said Sean Lane, founder and managing director of China Market Research Group.
“Chinese retail investors and the government are driving up the price of gold in search of higher returns and a safe haven,” he said.
According to official data released by the U.S. Treasury, China’s holdings of U.S. Treasuries have fallen to $682 billion as of November 2025, down 11% from the previous year. Meanwhile, the People’s Bank of China reportedly expanded its gold reserves for 15 consecutive months through January, to about 2,300 tonnes.
“Along with a flight to safety, there is also the possibility of a gold bubble expanding in China,” said Hussain of Capital Economics.
