Chinese Gold ETF Surges Following PBOC’s Investigation into BTC Exchanges

The recent inspection of Chinese Bitcoin exchanges by the People’s Bank of China (PBOC) has got many investors moving towards the next best thing. In the past few days, the Chinese market is seeing an increase in adoption of Gold Exchange Traded Funds (Gold ETFs). Few reports suggest that the increased inflow is not only limited to the domestic market, but also across geographies.

Bitcoin, the popular cryptocurrency is better known as digital gold. The digital currency received the name mainly due to various similarities it shares with the yellow metal. Bitcoin like gold is considered to be a real asset, as both of them have inherent value with no direct links to any fiat currency.

China is one of the leading markets for Bitcoin. With weakening yuan, the population is looking for alternative assets that are not easily affected by the country’s economic situation. It has led to an increased demand for Bitcoin. Automated Bitcoin trading activity, in the absence of any trading fees imposed by the platforms, has further driven the demand.

Following PBOC’s inspection, all major trading platforms in the country have suspended their leveraged and margin trading options. There are also indications of these exchanges doing away with free trades in the coming days. Also, there are speculations of the Chinese regulatory authorities imposing more restrictions in the near future.

All these factors have got many investors exploring other options, with the intention of escaping possible government scrutiny. A leading financial publication has observed a massive influx of funds into commodity-linked exchange traded funds. The news outlet has found gold-backed ETFs to be the largest recipient of such funds. In the past week, China has attracted $52 million, all directed to the biggest Chinese ETF — Huaan Yifu Gold ETF.

The Gold ETF investment trend in China closely follows that of Frankfurt and London. Also, the investments in Huaan Yifu Gold ETF is not confined to Chinese nationals and entities alone. In the absence of fool-proof statistics, it is speculated that at least some of the investors are used to trading CNY/BTC pair, and they are looking to diversify their portfolio amid looming uncertainties.

Ref: ZeroHedge | Bloomberg | Image: Shutterstock