Summa Silver Corp. (TSXV: SSVR, OTC: SSVRF, FRA: 48X)
Silver Lives Here
As the price of gold continues to hit record highs above $2,900 per ounce, an official news from China has reignited investor sentiment to go long on the precious metal.
China’s General Administration of Financial Supervision issued the Notice on the Pilot of Insurance Funds Investing in Gold on 7 February, stating that the pilot insurance companies can carry out the pilot of investing in gold for the purpose of medium and long-term asset allocation.
The notice stipulates that the pilot insurance companies should strictly implement the investment ratio requirements, and the combined investment gold book balance should not exceed 1 per cent of the company’s total assets at the end of the previous quarter.
It is estimated that this could release about 200 billion yuan ($27.4 billion) of capital. This move will inject new momentum into the gold market and push prices further up.
Liu Xinqi, chief analyst for China’s Guotai Junan non-banking financial sector, and his team said in a report that the policy was introduced because insurers lacked medium to long-term asset options with stable returns. The policy change makes gold the first commodity that Chinese insurers are explicitly allowed to invest in.
China has always restricted insurance funds from investing in assets that do not have “stable cash returns” and limited the amount of money they can invest in bonds and stocks.
According to analysts, China’s property market woes and the country’s struggling economic recovery, record-low bond yields and the looming need for a massive economic stimulus all provide good reasons for gold to continue to rise.
Meanwhile, the People’s Bank of China is once again buying gold. On Friday, China’s central bank gold reserves stood at 73.45 million ounces at the end of January 2025, an increase of 160,000 ounces from the previous month, the third consecutive monthly increase, according to official reserve asset data updated on the People’s Bank of China’s website.
Firm buying by the central bank, coupled with a new pilot gold purchase scheme for insurance funds, have further cemented gold’s investment status as the asset of choice.
If these factors hold as expected, the next phase of the bull market could be even more dramatic than what investors will see in 2024.
Nicky Shiels, head of research and metals strategy at MKS PAMP, noted that the pilot programme for Chinese insurers could absorb around 7 million ounces of gold, which isn’t huge and isn’t expected to impact the outside market as insurers will be accessing gold through the Shanghai Gold Exchange (SGE), but it will still support a rally in the global gold market.
