In the realm of finance, few assets command as much attention and respect as goldThis precious metal has historically served not just as a physical commodity, but also as a safe haven for investors seeking refuge amidst economic turbulenceRecently, gold prices have seen a remarkable surge, setting new records and drawing in both retail and institutional investors alikeOn February 10, the spot price of gold in London crossed the $2,900 mark, followed by COMEX gold futures which surged past $2,930. The buzz continued into February 11, with the international gold price hitting unprecedented highs throughout the day.

By the noon of February 11, the price of London spot gold reached a staggering peak of over $2,940 per ounce, reflecting an increase of over 1%. COMEX gold futures followed suit, escalating to a record high of $2,968.50 per ounceThis dominating rally in gold prices is not just isolated to the spot and futures markets; it is also mirrored in the wealth of gold-themed exchange-traded funds (ETFs), which too have hit all-time highs in their net asset valuesAcross two days on February 10 and 11, all 20 domestic gold-themed ETFs recorded a surge in their prices.

The meta-narrative driving this bullish sentiment towards gold is shaped predominantly by an array of geopolitical tensions and macroeconomic fluctuations that have escalated since the dawn of 2023. As a steadfast safe haven asset, gold has increasingly attracted considerable investment interest, price resilience translating into tangible gains across various measuresFor the entirety of 2024, even with some fluctuations in the fourth quarter, gold showcased approximately a 30% yearly appreciation, marking it as one of the top-performing global assets of the year.

By January 2025, gold maintained its upward trajectory, once again carving out new territory by breaching the $2,800 per ounce thresholdFollowing the historic peaks of the previous year’s fourth quarter, by the evening of February 10, gold prices had already escalated beyond the $2,900 per ounce line

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The same trend is visible in Chinese gold jewelry, where prices for well-known brands like Chow Tai Fook and Lao Feng Xiang surpassed 870 yuan per gram on February 10, reflecting the rising demand in the consumer market as well.

The World Gold Council recently released a 2024 gold demand trend report indicating that central banks globally have been purchasing gold for the third consecutive year, acquiring over 1,000 tons in totalThe demand for physical gold has surged to an astounding 4,974 tons, setting a new historical benchmarkNotably, China's official gold reserves reached 73.45 million ounces by the end of January, with the People’s Bank of China continuously amassing gold for three months straight.

Subsequently, there has been a marked increase in the inflow of funds into gold-themed ETFs—a clear reflection of the upbeat market sentiment toward goldIn light of a regional asset shortage, investor demand for gold-related assets has clearly amplifiedBeyond physical forms like bullion and coins that offer low premiums, there has also been a significant uptick in gold futures and related ETF holdings.

The World Gold Council has reported a dramatic escalation in gold ETF demand from the Chinese market in 2024, witnessing an influx of around 31 billion yuan (approximately $4.4 billion, or 55 tons). This year also marked a record-high demand for gold ETFs in China, with total assets under management surging to 71 billion yuan (approximately $9.7 billion), leading to a remarkable 150% increase in value and breaking historical recordsOverall, total holdings in China’s gold ETFs jumped by 87% to reach 115 tons—another significant landmark.

As of the end of 2024, the Chinese market boasts 20 distinct gold-themed ETFs, the three largest being the Hua’an Gold ETF, Bosera Gold ETF, and E-Fonda Gold ETF, all managing over 10 billion yuan in assetsThe Hua’an Gold ETF, currently the largest in the market, saw its total shares rise from 3.008 billion at the end of 2023 to 4.850 billion by the close of 2024. This increase is mirrored in the fund's net assets, which soared from 13.954 billion yuan to 28.676 billion yuan—more than doubling its value.

Behind the scenes, seasoned fund manager Xu Zhiyan, who commands nearly two decades of experience, has been at the helm of the Hua’an Gold ETF, overseeing its operational structure

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In past interviews, Xu has emphasized the integral role gold plays in asset allocation, likening it to a stabilizing agent for investment portfolios due to its negative correlation with other risky assets during turbulent timesHe suggests that investors should allocate between 5% to 15% of their portfolios to gold, providing a cushion against volatility while allowing for tactical adjustments based on market conditions.

Despite the significant gains in gold prices, Hua’an Fund remains optimistic about gold’s prospects in 2025 for several reasons: first, a reversion of real interest rates is expected, aligning with a backdrop of slower global economic growth and the long-term inflation considerations faced by the United StatesSecond, faced with persistent inflation and financial turbulence, central banks, particularly in non-Western countries, are likely to continue their robust gold purchasing strategiesThird, the low correlation of gold with other assets, especially in the current low-interest-rate environment, accentuates its strategic value in portfolio constructionFinally, the intrinsic growth nature of gold remains its currency attributes, particularly in countering the fluctuations tied to the U.S. dollar, with current high debt levels and rising interest rates compounding credit risks.

Additionally, as of the end of December 2024, China's gold holdings accounted for only 5.5% of total international reserves, significantly below the global average of around 15%. This disparity suggests a substantial area for growth and further acquisitions by Chinese authorities in the realm of gold reserves.

The recent policy directions have also heightened the strategic significance of gold within investment paradigmsOn February 7, the Financial Regulatory Administration announced that insurance companies could begin piloting investments in gold as part of their mid- to long-term asset allocation strategiesInsights from Bosera Fund indicate that potential investment inflows from these insurance entities could reach between 100 billion to 200 billion yuan, marking a figure as high as seven times the amount purchased by the central bank in 2024. Although the accumulation phase is likely to extend over time, the inherent nature of insurance funds as long-term capital could stabilize gold assets significantly, benefitting the overall gold market in a sustained manner.

Furthermore, Hua’an Fund asserts that the released guidelines provided clarity on the scope of gold investments, which may include six categories such as spot gold contracts traded on the Shanghai Gold Exchange

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