The Chinese authorities have recently developed an appetite for gold. The government is increasingly purchasing the precious metal, pushing it to a record-breaking $2,400 per ounce. According to Bloomberg, China is now the world's largest producer and buyer of gold.

This commodity is seen as the best investment choice amid the ongoing geopolitical turmoil that has gripped global markets. Uncertainty stemming from geopolitical strife is bolstering the safe-haven play. Governments are even turning away from the US dollar, which is currently under pressure from the prospect of US interest rate cuts, and shifting to the yellow metal. 

Demand for the metal is largely driven by strong buying activity from China. In addition to the central bank, private investors, hedge funds, and traders are among those actively adding gold holdings to their investment portfolios. After all, the precious metal is regarded as a reliable store of value in times of instability.

India, China’s competitor in this regard, is the world’s second-largest consumer of gold. In 2023, however, Indian gold consumption was relatively sluggish. India's demand for jewelry, coins, and bars fell by 6% while China's surged by 10%.

In addition, China mines and imports more gold than any other country. Over the past two years, its overseas purchases totaled more than 2,800 tons, or about one-third of the stockpiles held by the US Federal Reserve.

The People's Bank of China is the most active domestic buyer of gold. The regulator has been snapping up the metal for 17 straight months in an attempt to diversify its reserves away from the dollar and hedge against currency depreciation, thus reducing its reliance on the US currency.

With many investors viewing the yellow metal as the most reliable and solid investment, the gold market has outsized upside potential, analysts sum up.