UBS: Gold demand from China will continue.

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Source: Wall Street Insights

UBS Gold & Metals Team’s latest report shows that, almost unanimously in line with what participants in the Chinese market have told the team, the outlook for gold is bullish over the medium to long term. Changes to tax rules, the expansion of bank gold accumulation plans, and faster entry by insurance company pilot programs are driving structural release in institutional demand—about half of the pilot insurance companies have already begun active deployment, and the trading volume at the Shanghai Gold Exchange has risen noticeably over the past few weeks.

UBS Gold & Metals Team’s latest report also shows that UBS has recently held in-depth exchanges with multiple market participants in China, and the conclusion is: gold demand from China will very likely continue.

Driven by the risk that Middle East conflicts may spill over, a deterioration in the global macro outlook, and expectations for a weaker U.S. dollar, respondents’ overall sentiment is relatively cautious, but their expectations for gold’s medium- to long-term trajectory are almost unanimously upward. The bank noted, “Most, and in some cases all, of the conversations we had show an upward bias in our expectations for gold prices over the medium to long term.”

Macroeconomic concerns as a catalyst for gold demand

The report shows that market participants in China are highly alert to the impact of the situation in the Middle East, and overall sentiment is quite pessimistic.

Respondents generally believe that the negative shocks to the global macro outlook have, to a large extent, already been digested; even if a window of easing appears between the U.S. and Iran, it is still unlikely to fundamentally change this judgment in the short term.

Most respondents take a cautious view of the U.S. outlook, focusing on stagflation risks and a weaker dollar. At the same time, they are skeptical about global central banks rapidly repricing interest-rate hikes, and they are more inclined to focus on the real impact on economic growth from high energy prices and geopolitical uncertainties.

These multiple concerns about growth, inflation, and geopolitics are precisely the underlying logic behind the Chinese market’s continued bullish stance on gold.

Institutional demand accelerating its release

Changes on the demand side are not only driven by sentiment; structural factors are also pushing institutional capital to enter the market.

UBS has sorted out three major driving threads:

First, adjustments to tax rules. The new rules introduced last year continue to exempt investment gold from tax, while raising the tax costs for jewelry gold.

According to a report by the Shanghai Securities News, the Ministry of Finance and the State Taxation Administration jointly released an announcement on gold-related tax policies. The relevant rules take effect from November 1, 2025, and run through December 31, 2027. Under the new policy, standard gold traded through the Shanghai Gold Exchange and Shanghai Futures Exchange will continue to be exempt from value-added tax.

Second, expansion of bank accumulation plans. Banks are promoting gold accumulation plans on a large scale through electronic platforms, with coverage continuously expanding and participation thresholds on the retail side further lowered.

Third, faster acceleration of insurance-company pilot programs. This is the most noteworthy incremental information highlighted in the report. At present, among the insurance companies participating in the pilot program and allowed to invest up to 1% of their asset management scale (AUM) in gold, around half have already started active deployment.

The trading activities of these insurance companies will be reflected in the trading volume of the Shanghai Gold Exchange (SGE), “because this is the product they are allowed to trade.” The data confirms this assessment—SGE trading volume has shown a clear increase over the past few weeks.

UBS believes that the current deployment by insurance companies is still at an early stage: “it is still quite a distance from fully allocating.”

For mid-sized insurance companies and some institutions with higher risk appetite, they are expected to be the most active participants in the near term. For insurance companies that have, until now, remained relatively on the sidelines, two major obstacles are a lack of professional knowledge and the fact that gold does not generate yield.

From a long-term perspective, upside risks come from two directions: first, expanding the pilot program to more industries or other segments; second, raising the upper limit on the AUM proportion of investable gold. Once these policies are rolled out, they will open up more room for gold demand.

Short-term fluctuations do not shake long-term confidence

It is worth noting that the sharp pullback in gold prices at the end of February and the continued weakening in March have caused some concern in the Chinese market.

UBS said, “Almost every time we hold a conversation in China, it involves various reasons why the gold price is under pressure.” Market participants are clearly re-examining underlying assumptions and long-term outlooks—“tension is evident.”

The core question is: Is the current level already an attractive time to enter, or is there still room to wait patiently?

Even so, UBS maintains a constructive judgment on the overall outlook for the second quarter, especially given that gold prices stabilize and the domestic premium remains. On the supply side, there is currently also no obvious bottleneck, and it is relatively smooth to obtain import quotas and licenses.

Risk Warning and Disclaimer

The market is risky; investment requires caution. This article does not constitute personal investment advice, nor does it consider a particular user’s special investment objectives, financial situation, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are compatible with their specific circumstances. Invest accordingly at your own risk.

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Editor-in-charge: Zhu Hennan