Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
China recently unveiled a pilot program permitting insurance companies to invest in gold for the first time. The gold-positive move aims to optimize fund diversification and stability as the country’s economy teeters on the verge of recession. The world’s second-largest insurance industry stepping into the gold market could significantly boost demand and possibly drive prices higher. In the face of rising economic instability, analysts insist this initiative could further bolster China’s dominance as the leading source of gold demand.
What’s the plan?
On February 7, 2025, a hand-selected group of 10 Chinese-based insurers are able to invest in gold for the first time. The participants–representing some of the largest and most well-funded companies in the country–are permitted to allocate up to 1% of their assets to a variety of gold assets, although there is no minimum requirement.
Candidates are authorized to invest in a range of paper and physical gold assets through:
- Spot contracts – Buying gold instantly at the spot price.
- Deferred delivery – Securing current prices but buying later.
- Centralized pricing – Bulk buying at a set group price.
- Spot inquiry – Negotiating real-time gold prices.
- Swaps – Exchanging gold for cash or other types of gold.
- Leasing – Renting gold for liquidity or hedging.
Historically, the Chinese government has maintained a firm grip on where insurance companies place their resources, limiting exposure to more conventional assets such as stocks and bonds. This shift indicates gold is increasingly viewed as a favorable, stable, and low-risk asset as traditional investments fall out of favor.
China Goes All-In on Gold
In recent years, no country has done more than China to embrace gold more decisively as a pillar of economic stability and future growth. This decision to unleash insurance funds on the gold market is the latest move in a series of aggressive steps toward shooting gold into every fiber of the economy, such as:
- The PBOC stacked 34 tons of gold throughout 2024, even with a six-month breather, bringing total reserves to 2,264 tons.
- China’s jewelry market overtook India as the largest single source of gold demand, consuming nearly 500 tons last year.
- Gold rose 16% as a share of the country’s global reserves, while the dollar fell by 58%.
- The government implemented gold-buying quotas to maintain steady purchases.
China’s critical push toward gold serves a dual purpose: reducing reliance on the frequently weaponized US dollar while bolstering its domestic economy and currency.
Ross Norman, precious metals analyst, says this shift in the insurance market “furthers China’s position as the primary gold-consuming nation.”
👉 Related Read: Who’s Driving Gold’s Remarkable Growth?
Insurers to Inject Billions
China’s move to open its massive insurance sector to gold investments could channel significant capital into the market. For reference, Chinese insurance companies raked in around $700 billion (5.12 trillion yuan) in 2023. That number is expected to more than double to $1.73 billion (12.6 trillion yuan) by 2035.
In 2024, global gold consumption amounted to roughly $382 billion. If China’s insurance sector bought into the yellow metal at 1% of their total assets, gold demand would increase by approximately 2%. Bloomberg has a higher estimate that the pilot program could unlock $27 billion worth of demand in the gold market.
Impact on Gold Prices
With gold prices reaching new highs early in the year, many investors are wondering just how much higher they can climb. China’s latest gold-focused initiative signals that demand is rising, and eventually, prices will rise further. The program makes it clear that Chinese insurers are investing for the medium to long term, ensuring a sustained boost to gold consumption and market stability. Experts already predict that China will be a key driver of gold demand for the next decade.