China's Institutional Buyers Absorb Gold Dip as Rotation Trade Continues

Gold prices touched a two-month high of nearly $4,435 on August 11 before retreating to around $4,399. This brief dip was absorbed by Chinese institutional investors, who have been buying gold in large quantities.

According to Bloomberg, China's domestic gold ETFs have seen inflows for 14 consecutive trading sessions through Monday, totaling over $1.2 billion. The single largest daily inflow reached $370 million, reversing the record outflows of $2.3 billion in June.

This buying pattern is not a sentiment shift but rather a rotation trade, driven by portfolio construction logic. Chinese institutional allocators are rotating out of domestic equities, which had a brutal July, and into gold due to its deep liquidity and lack of counterparty exposure.

The People's Bank of China has been adding to its gold reserves for over a year and a half, establishing an official-sector demand floor. Meanwhile, institutional ETF demand is now providing another floor for gold prices.