The gold whipsaw that spooked markets: Why China’s ‘unruly’ trading is under fire

After hitting a record $5,594 an ounce, gold plunged nearly 10% as US Treasury Secretary Scott Bessent and analysts point to speculative flows in China.

• Gold hit a record $5,594, then plunged nearly 10% in one day
• China's speculative trading is driving gold price volatility
• Chinese gold ETF holdings and futures trading have surged in 2025

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Gold’s surge to a record $5,594 per ounce on January 29, followed by a near 10 percent plunge a day later, has sharpened scrutiny on China’s role in driving extreme price swings, with US Treasury Secretary Scott Bessent calling recent activity 'unruly.'

The volatility has raised questions about whether bullion’s traditional safe-haven status is being overtaken by speculative flows, particularly from Chinese retail and institutional investors.

Speaking on Fox News’ Sunday Morning Futures, Bessent said the move in gold prices reflected turbulence in Chinese markets.

“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,” he said.

Regulators in China have repeatedly raised margin requirements on gold trading in recent weeks as prices whipsawed.

Analysts cited by CNBC say China has emerged as the dominant force behind the latest surge in precious metals.

Nicky Shiels, head of research and metals strategy at MKS Pamp, told CNBC that China has been the 'dominant driver' this time.

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

Chinese gold-backed ETF holdings have more than doubled since the start of 2025, according to data provided by Capital Economics and cited by CNBC. Gold futures trading activity has also accelerated sharply.

Hamad Hussain, economist at Capital Economics, told CNBC that growing access to futures contracts and exchange-traded funds in China has amplified volatility. “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,” he said.

Volumes on the Shanghai Futures Exchange have surged, with year-to-date average trading approaching 540 tons per day, Ray Jia of the World Gold Council told CNBC. That builds on record average trading volumes of 457 tons a day in 2025.

Hussain warned that the nature of the buying suggests speculative excess. “The growing use of futures contracts and leverage to invest in gold is not typical of investors seeking a safe haven asset,” he said, adding that recent trends “imply that there may be a speculative bubble inflating.”

The shift from defensive buying to leveraged positioning has changed the character of the rally, analysts said.

The surge in participation also reflects broader domestic and geopolitical factors.

Zhaopeng Xing, senior China strategist at ANZ Research, told CNBC that limited access to alternative financial assets and weakness in the property market are pushing households toward gold. Deposit rates near 1% and falling real estate prices have made bullion an attractive alternative.

Gold currently accounts for about 1 percent of Chinese household assets, according to ANZ Research data cited by CNBC. Xing expects that share to rise toward 5 percent in the near future.

There is also a strategic overlay. Shaun Rein, founder and managing director at the China Market Research Group, told CNBC that Beijing is pushing de-dollarization to reduce exposure to US economic pressure.

“Chinese retail investors and the government are driving higher prices in gold as they search for higher returns and safe havens,” Rein said.

Official US Treasury data show China’s holdings of US Treasuries fell to $682 billion in November 2025, down 11 percent year-on-year. Meanwhile, the People’s Bank of China has expanded its gold reserves for 15 consecutive months through January, taking holdings to roughly 2,300 tons.