Rafomac News, Tech & Trends That MatterFor the first time ever, China’s biggest retail investment fund is a gold exchange-traded fund, outpacing its own stock index. This shift, amid central banks’ relentless gold buying, is sparking discussions of gold soaring to $38,000 per ounce.
China’s Gold ETF Surpasses Its Stock Market
Recently, China witnessed an unprecedented event: its largest exchange-traded fund (ETF) held by ordinary investors overtook the country’s flagship stock ETF. The Guan Yu Gold ETF now holds $13 billion, edging past the country’s equivalent of the S&P 500, which sits at $12 billion. In the world’s second-largest economy, retail money is flocking to gold rather than stocks.
This shift is even more striking because it’s happening while gold prices have been falling. Gold peaked around $5,600 an ounce earlier this year but then slumped nearly 30% to below $4,000. Despite that, China’s demand surged.
China’s Relentless Gold Buying and Central Bank Movements
The People’s Bank of China has been buying gold for 20 consecutive months—a streak unseen since at least 2015—with a massive 15 tons purchased in June alone, the biggest monthly haul since October 2023. Over the first five months of this year, China imported roughly 700 tons of gold, adding up to over 14,000 tons since 2015.
China isn’t alone. Central banks worldwide have ramped up their gold purchases, adding 41 tons net in May. Countries such as Poland, Uzbekistan, and Kazakhstan have also joined the buying spree. And key changes loom: from July 24, four of China’s biggest banks will halt retail gold trading to ensure that citizens buy real physical gold—not just paper claims.
Reviving Hamiltonian Economics and America’s Industrial Pivot
Something else connects to China’s gold mania—a revival of a centuries-old economic strategy. The US Treasury Secretary recently published an op-ed championing what’s called Hamiltonian economics, named after Alexander Hamilton, America’s first Treasury Secretary. Hamilton’s blueprint was clear: protect and nurture young industries through tariffs and subsidies until they could compete globally. This strategy powered America to become a manufacturing powerhouse over 150 years.
Fast forward to today, the US faces deindustrialization, hollowed out by decades of financialisation and outsourcing. The Treasury’s plan aims to rebuild factories, shield domestic workers, and maintain a strong dollar, but thinkers like Luke Groman argue that all three can’t coexist. You have to sacrifice one: a strong dollar, affordable consumer prices, or vibrant industry.
Why Gold Could Become the New Global Reserve Asset
Here’s the kicker. To keep the dollar strong while reindustrializing, the US might need to embrace a neutral reserve asset. Enter gold—a timeless store of value with a history stretching thousands of years. China’s moves since 2009 and the steady accumulation by global central banks suggest a plan to pivot the global financial system away from solely relying on the dollar. This neutral asset could serve as a ballast for trade imbalances and currency fluctuations.
Calculations show that for gold to rebalance the largest trade surplus—China’s estimated $1.2 trillion last year—the price would need to soar to an eye-watering $38,000 per ounce. That’s derived by dividing China’s surplus by the tons of gold it imports annually.
Signs This Could Be the Road Ahead
All these puzzle pieces fall into place: China’s gold ETF overtaking stocks, the People’s Bank’s record gold buys during a price slump, China barring paper gold to ensure real physical ownership, the US exporting historic amounts of gold to China, and mentions of restoring Hamiltonian economics in official US discourse.
This could play out in two ways: a chaotic financial collapse where gold spikes as a safe haven, or a managed transition where gold becomes a global reserve asset as economies rebalance and manufacturing returns to America. Both paths point to gold appreciating substantially, but the timing could stretch over a decade.
The takeaway for investors is that while gold’s immediate leap to $38,000 an ounce seems improbable, the underlying forces suggest rising significance for gold in global markets and portfolios. Measured against gold, even US stocks and bonds have lost ground in recent years, highlighting gold’s unique role.
This evolving story merits close watching—not just for the shiny metal itself, but for what it reveals about the shifting balance of economic power and global finance.
