Breaking: China Insurance Companies Will Now Buy Gold

Reporting and Implications

THE NEWS:

Pursuant to China’s continuous drive to monetize gold the nationhas begun to permit Gold’s use in their insurance industry as an investment vehicle for companies to offer.

Weixin Media reported the following out of China:

On February 5, 2025, in order to broaden the channels for the use of insurance funds, optimize the insurance asset allocation structure, and promote insurance companies to improve their asset-liability management level, the Financial Regulatory Administration issued the "Notice on the Pilot Program of Insurance Funds Investing in Gold Business" (hereinafter referred to as the "Notice"). The pilot program of insurance funds investing in gold business will be carried out from the date of issuance of the "Notice".

This is no small thing and has historic parallels in the US.

ANALYSIS: USA PLAYBOOK, BUT SAFER:

In the 1980s, with the US in almost desperate need to replace its whithering manufactiuring industry as an economic engine, espcially after the stagflationary 1970s— The US liberalized ownership of equities fo all financial industries, effectively deregulating their ownership. The result was a booming economy and a broadening ownership of stocks as investment vehicles. This era was called the GOGO 80s.

China is replicating the US market structure but liberalizing and encouraging ownership in Gold, the safest investment asset on earth. They also culturally see the result of too much financialization, especially with equities that can result in welath disparity and bubble creation.

China is doing the same thing, but with Gold. China is financializing itself jsut like the US did, but with more reliable and less volatile assets.

THE FULL STORY

Here is GoldFix breakdown of that story starting with Eric Yeung who first alerted us to it with this post on X.com

HUGE NEWS FROM CHINA FOR PHYSICAL GOLD

CHINA The [planned] pilot program of insurance funds investing in gold business has been launched, and 10 insurance companies have participated in the pilot program as reported by Hu Zhiting for “ThePaper” - Source Eric Yeung

This was then confirmed

Gold Investment Pilot: Implications for Insurance Companies and Market Dynamics

Leading Insurers Positioned to Benefit from Pilot Program

The first batch of 10 pilot projects has been identified, with major insurance companies set to benefit. Participants include PICC Property and Casualty Insurance, China Life, China Taiping Life, China Export & Credit Insurance Corporation, Ping An Property & Casualty Insurance, Ping An Life, China Taiping Property and Casualty Insurance, China Taiping Life Insurance, Taikang Life Insurance, and New China Life. The pilot primarily involves large, well-established insurers with strong investment and research capabilities. Listed insurance firms are expected to benefit directly, with improved investment stability and long-term return potential.

Enhancing Asset Allocation and Risk Diversification

Gold investments provide insurance funds with a hedge against market volatility and a tool for portfolio diversification. As a precious metal, gold exhibits low correlation with traditional assets like stocks and bonds, making it an effective stabilizer. In periods of economic uncertainty or heightened market fluctuations, gold is expected to act as a "ballast" asset, reducing overall portfolio volatility.

Insurance funds, given their scale, must balance security, liquidity, and profitability in asset allocation. Gold aligns with these investment objectives by offering a hedge against inflation and providing insurers with additional flexibility and investment options.

Controlled Investment Scale and Market Impact

The 10 pilot insurers collectively manage approximately 19.95 trillion yuan in total assets. With a regulatory investment cap set at 1% of total assets, the estimated gold investment size currently stands at 199.5 billion yuan, approaching 200 billion yuan. This level of allocation could influence gold supply, demand, and pricing. As the pilot expands and insurers' total assets grow, gold investments and their market impact are expected to rise.

Balancing Returns with Price Volatility Risks

Gold, as a global asset with high liquidity, enables insurers to participate indirectly in international markets, enhancing global asset allocation. During periods of heightened volatility and inflationary pressure, gold prices tend to rise, helping insurers preserve value and improve long-term returns while mitigating potential "interest rate spread loss" risks.

However, with gold prices already at elevated levels, insurers must carefully assess market trends and employ hedging strategies to manage price volatility risks. The effectiveness of gold investments will depend on insurers’ ability to navigate market fluctuations and implement sound risk management strategies.

Strategic Considerations for Investors

The gold investment pilot represents a key step in deepening insurance fund reforms, expanding asset allocation options, and promoting long-term, high-quality industry development. As a low-correlation asset, gold enhances portfolio stability and supports insurers' ability to function as long-term capital providers for the real economy.

The 10 participating insurers are industry leaders with established investment and risk management capabilities. Their first-mover advantage in gold investment positions them to accumulate experience and maximize long-term benefits. Recommended focus should be on China Pacific Insurance, New China Life Insurance, Ping An Insurance, China Life, and China Property Insurance.

Original Story Here