How China’s ‘unruly’ speculators might be fueling the frenzy in gold market

Gold’s wild price swings in recent weeks are increasingly being linked to speculative trading in China by some analysts, with U.S. Treasury Secretary Scott Bessent attributing the heightened volatility to “unruly” Chinese activity.

Gold prices jumped to a record high of $5,594 per ounce on Jan. 29 only to plummet nearly 10% the next day in its sharpest drop in decades. Since then, the yellow metal has struggled to consistently stay above the 5,000 level.

While broader factors such as U.S. interest-rate expectations and geopolitical tensions continuing to drive bullion demand, some analysts believe Chinese retail and institutional investors are playing an outsized role in driving volatility. 

Bessent, who spoke on Fox News’ Sunday Morning Futures, described the move bluntly. “The gold move thing, things have gotten a little unruly in China … They are having to tighten margin requirements. So gold looks to me kind of like a classical, speculative blowoff.”

Surging activity in gold futures and exchange-traded funds, rising use of leverage despite repeated margin hikes appear be behind gold’s choppy trade, market watchers echoed.

China has been the “dominant driver” impacting prices of precious metals this time, said Nicky Shiels, head of research and metals strategy at MKS Pamp.

“That’s been driven by a mix of speculative inflows, retail and institutional, through a mix of ETFs, physical bars and futures positioning,” she told CNBC.

Chinese gold-backed ETF holdings have more than doubled since the start of 2025, according to data provided by Capital Economics, while gold futures trading activity has picked up sharply in recent months. 

“This [volaitilty] is partly because of growing access to gold-linked financial products like futures contracts and exchange-traded funds (ETFs) in China,” said Hamad Hussain, economist at Capital Economics. “What’s more, there are signs of increasing amounts of leverage in China’s gold market too, which can lead to significant gold price volatility.”

Volumes on the Shanghai Futures Exchange have surged, with year-to-date average approaching 540 tons per day, Ray Jia, research head APAC ex‑India and trade engagement deputy head China at World Gold Council, told CNBC. That rise builds on the record trading volume in 2025 at 457 tons a day on average.

Regulators have taken notice, with the Shanghai Gold Exchange repeatedly raising margin requirements to curb heightened volatility.

“The growing use of futures contracts and leverage to invest in gold is not typical of investors seeking a safe haven asset,” Hussain said, warning that the recent buying “implies that there may be a speculative bubble inflating.”

From safe haven to speculative…