China's Gold premium rises amid tariff showdown

In a twist brought on by the ongoing tariff war, gold in China is now costing way more than global spot prices. As US and Chinese trade tensions heat up, both consumers and investors are turning to gold as a safe haven. This week, China hiked tariffs on US imports to 125%, striking back at Trump's decision to raise tariffs on Chinese goods to 145%.

That extra demand helped gold prices bounce back in London. After a slight dip earlier in the week, benchmark prices surged past $3,200 an ounce, hitting a record high of $3,243.82 on Friday—all fueled by the uncertainty in the trade battle.

"China has been actively snapping up gold every day this week, driven by tariff uncertainty and the weakening yuan," said Hugo Pascal, a precious metals trader at InProved.

The Shanghai Gold Exchange is showing the strength of this trend. In Friday's afternoon auction, the price premium for gold soared to 1.1% above the London benchmark, up from just 0.15% a week ago.

Back home, Chinese investors are rushing towards gold as the yuan hits its lowest value since 2007 and falls to a 19-month low against the currencies of its main trading partners. This big move by both global institutions and everyday investors reflects worries over economic slowdown, inflation, and eroding asset values.

In China's physical gold market, price premiums have widened dramatically. What was once a narrow $6-$13 an ounce gap last week has now ballooned to between $24 and $54.

"Seeing gold bought on price strength is rare—it happens only when the situation is not just positive, but downright urgent," remarked independent analyst Ross Norman.

Adding to the momentum, the People's Bank of China has been purchasing bullion for five consecutive months, boosting confidence in gold investments. Recently, China also updated its rules, allowing some insurance funds to invest up to 1% of their assets in gold, further fueling the demand from large institutions.