The current bull market in gold began in the spring of 2024, fueled largely by aggressive Chinese traders who invested in futures contracts on the Shanghai Futures Exchange (SHFE), while Western investors remained on the sidelines. In just six weeks, from March to April, these traders drove gold prices up by $400, or 23% – an extraordinary rise for the precious metal. Since then, their activity has calmed down, but it was only a matter of time before they returned. After the week-long Chinese Lunar New Year holiday, these traders are returning to the market – at the same time that gold was already on fire. Gold futures on the SHFE were the main vehicle behind the wild rise in the spring of 2024 – a boom that then also affected international prices: 
The spring Chinese speculative frenzy in gold is also reflected in the chart of open positions in SHFE gold contracts: 
Over the past year, SHFE gold futures have tracked the international gold price, rising steadily before forming a range from late October to January. However, as soon as Chinese financial markets reopened this week after the Lunar New Year holiday, SHFE gold futures prices surged, quickly recovering the ground lost from the international rally that unfolded while China was out of the market. This bullish breakout signals strong upside momentum, suggesting that even bigger gains are to come. 
The range and recent bullish breakout are also evident in the spot price of gold in Chinese yuan, providing further confirmation of the bullish trend. 
As predicted since December, the spot price of gold in US dollars also recently broke an accumulation pattern in a triangle formation, confirming the bullish momentum that exists. 
So all the key ingredients for another China-led gold mania – similar to last spring – are now in place. It may just be a matter of time. A key indicator to watch is the volume of SHFE gold futures, which you can see on TradingView under the symbol AU1! Last spring, the surge in volume accompanied the spectacular rise in gold. So far, volume has been subdued, but it is likely to increase as the rally gains momentum. For confirmation, I am looking for a significant increase in volume to validate this theory. 
“Gold Mania”
Another key indicator of a potential Chinese “gold mania” is whether the domestic price of the precious metal in China is trading at a premium to the international price.
During last spring’s rally, the domestic price was trading at a premium of about $50 over the international price.
Currently, the premium is zero or almost nonexistent, but it is worth watching closely.
If a significant premium emerges, it will likely signal that Chinese demand is driving gold higher again.
A major catalyst for a potential Chinese gold rush is the country’s severe economic crisis. With property and stock markets collapsing, an estimated $18 trillion has been wiped out by households—a financial crisis reminiscent of China’s version of the Great Recession of 2008. At the same time, government bond yields have collapsed to historic lows, signaling an increasingly deep deflationary spiral. In low-interest-rate environments like China’s, gold becomes more attractive as the opportunity cost of holding it falls. Moreover, China is likely to respond with a massive fiscal stimulus package (“bazooka”) to combat deflation, which could provide a tailwind for gold, silver and other commodities. 
Another potential catalyst for a Chinese bull run is the People’s Bank of China (PBOC) resuming official gold purchases after a six-month “break.” As recently reported, the PBOC has likely been accumulating gold all along, but its decision to publicly announce the resumption of purchases appears to be a strategic move aimed at encouraging domestic demand for the precious metal – something that aligns with the Dragon Land’s overall strategy to reduce its reliance on the US dollar and increase its holdings of gold. 
Everything points to a new explosive rise in gold, with Chinese traders once again playing a leading role, as happened last spring. With SHFE gold futures breaking resistance, the possibility of increased trading volume and the prospect of a premium re-emerging in the domestic gold price, the conditions for another bullish episode are gradually taking shape. China’s economic crisis, historically low bond yields and the prospect of a massive support package reinforce the positive scenario. At the same time, the new gold purchases by the PBOC underline the general shift towards gold as a preferred asset. If these factors align as expected, the next phase of this bull market could prove even more spectacular than what we saw in 2024.
