Rafomac News, Tech & Trends That MatterFor the first time, China’s biggest exchange traded fund is a gold ETF, outpacing its top stock fund. Meanwhile, the People’s Bank of China has been buying gold for 20 consecutive months, even as prices plunged. What’s behind this gold frenzy — and why do some analysts predict a jaw-dropping $38,000 per ounce price?
China’s Shift to Gold: More Than Just an Investment
Last week marked an unprecedented moment in China’s financial landscape: the biggest exchange traded fund (ETF) preferred by ordinary investors is now a gold ETF. Guan Yu Gold ETF surpassed China’s equivalent of the S&P 500, boasting $13 billion in assets compared to $12 billion in stocks. This isn’t merely a shift in investment preferences — it speaks to a strategic pivot in the world’s second-largest economy.
What’s more telling is this surge occurred while gold prices tumbled. Earlier this year, gold touched a peak around $5,600 an ounce but nosedived almost 30% to under $4,000. Chinese investors, however, kept accumulating. The People’s Bank of China has just completed 20 straight months of gold purchases, a streak dating back to at least 2015. In June alone, they bought nearly 15 tons — the largest monthly purchase since October last year.
Since 2015, China imported upwards of 14,000 tons of gold, with over 700 tons arriving in just the first five months of this year. But it’s not just China. Central banks worldwide are buying gold aggressively, with 41 tons net bought in May. Countries like Poland, Kazakhstan, and Uzbekistan have joined the rush, underscoring a global trend toward gold accumulation.
Tellingly, China is shutting down retail gold trading on July 24th through its four biggest banks, signaling a crackdown on paper gold and an insistence that citizens trade only in physical gold. It’s a move to ensure ownership of real metal, not just paper claims.
The US Is Playing Its Own Hamiltonian Economic Game
Two weeks ago, the US Treasury Secretary published an op-ed in the Wall Street Journal outlining a planned economic strategy harking back to Alexander Hamilton’s 18th-century blueprint. Hamiltonian economics — based on tariffs, subsidies, and protectionist policies — was how America rose from a fledgling nation to an industrial giant. Trump himself referenced this strategy earlier this year, emphasizing tariffs to enrich domestic citizens instead of taxing them to benefit foreign nations.
This economic model shaped US dominance for over 150 years, but like all empires, it eventually faced de-industrialization. Britain’s empire waned after embracing free trade in 1846, only for the US to take over as global superpower by 1931. The US began losing its industrial base in 1971 when the dollar abandoned the gold standard — ushering in an era where factories closed and jobs moved overseas.
Why De-Industrialization Happens and What It Costs
Apparently, the financialization of the economy — turning products into stocks and papers — made American industry uncompetitive. Companies started outsourcing jobs and relied on share buybacks to boost stock prices. Instead of making things, wealth mostly grew on paper, draining economic independence. If a conflict erupts or supply chains break, a country with no factories is vulnerable. Meanwhile, consumers enjoyed cheaper imported goods, with TV prices dropping 98% since 2000. But services requiring local presence — childcare, healthcare, college tuition — soared by 159%, 281%, and 200% respectively.
This trade-off hollowed out America’s middle class and manufacturing prowess. Now, Washington is eyeing a comeback with tariffs and pledges to rebuild industry, protect the average citizen, and keep the dollar strong. But here’s the catch: you can only pick two. A strong dollar makes American factories uncompetitive, so either the dollar loses strength, factories stay shut, or prices rise sharply due to tariffs and inflation.
Gold as the Neutral Reserve Asset the World Needs
According to analyst Luke Groman, Treasury Secretary Scott Bessent likely prefers to sacrifice the dollar’s supremacy, introducing a neutral reserve asset as a pressure valve — and only gold has the track record to do that. This brings us full circle to China, which has been preparing since 2009.
After the 2008 financial crisis, China recognized the flaws in a global system dominated by a single credit-based currency: the US dollar. They pushed for a neutral international currency, echoing economist John Maynard Keynes’ 1940s idea of the Bangor — a basket of commodities designed to balance trade and punish surpluses or deficits, thus preventing factories from being hollowed out globally.
Of course, the US rejected that system post-World War II because it then ran trade surpluses. Today, the US finds itself on the losing end, and both sides now reference Keynes, demanding a neutral reserve asset to fix global monetary imbalances.
The World Bank and IMF’s former chief economist have recommended gold as that asset, noting its fixed supply and unlimited price potential. Yet the current gold price around $4,000 is too low to settle global trade deficits fairly.
How $38,000 an Ounce Was Calculated
Look to China’s trade surplus — roughly $1.2 trillion last year. Divide that by the 940 tons of gold China imported, and you arrive at an estimated fair price of about $38,000 per ounce. At that price, gold could clear major trade imbalances, especially between China and the US.
That’s why China and other countries are hoarding physical gold. China’s crackdown on paper gold and huge ongoing imports suggest they’re preparing for a major revaluation. Meanwhile, US gold exports to China have skyrocketed, indicating a flow of metal to rebalance reserves under this emerging system.
What’s Next for Investors?
This shift won’t happen overnight. It could take over a decade, with many twists and corrections along the way. For investors, this means a likely rotation away from financial assets toward real-world commodities and infrastructure. While the S&P 500 has surged 161% in dollar terms since 2018, it’s actually down 15% when measured in gold. Treasury bonds have fared even worse — down 78% in gold terms, while gold miners have gained over 200%.
Gold’s rise to $38,000 isn’t imminent, but the foundation is being laid quietly. This story is unfolding in plain sight — central banks buying gold, countries hoarding metal, and major moves by China hint at a seismic shift in global economics. Whether the US rebuilds its industrial base or the global system fractures dramatically, gold will be at the centre of it all.
If you’re wondering when to buy gold, patience is key. The direction looks set, but timing remains uncertain. This isn’t a sprint; it’s a slow but profound transition towards a new monetary order with gold at its core.
