With nearly 200 billion yuan in available funds, why are insurance funds "restrained" from entering the gold market?

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Gold prices repeatedly hit new highs, sparking widespread industry discussion about its future trend and investment value. Currently, nearly a year has passed since the China Banking and Insurance Regulatory Commission launched the pilot program for insurance funds to invest in gold, making the market naturally attentive to developments in insurance fund gold investments.

So, have insurance funds already entered the market in large numbers? Recently, exclusive information from several insurance companies reveals that many insurers have begun testing gold investments, but overall, they have not yet made large-scale allocations. In response, several interviewees stated that the short-term cautiousness of insurance funds is due to the initial cautious exploration required during the pilot phase, the time needed for team building, and the fact that gold prices have been rising steadily over the past year. From a long-term perspective, gold has distinctive safe-haven characteristics and is an interest-free asset. For insurers with long-term capital, timing the allocation and holding long-term is a good diversification strategy.

Insurance Companies Say They Will Gradually Increase Allocation

On February 7, 2025, the China Banking and Insurance Regulatory Commission issued the “Notice on Pilot Investment in Gold by Insurance Funds” (hereinafter referred to as the “Notice”), officially allowing insurance funds to participate in gold investment pilot programs, with the first batch of pilot entities including 10 insurers.

Following the implementation of the pilot qualifications, relevant insurers have gradually begun to deploy. In March 2025, PICC Property & Casualty, China Life, Ping An Life, and Taikang Life announced they became members of the Shanghai Gold Exchange and completed their first gold transactions. According to the Shanghai Gold Exchange’s official website, as of the time of reporting, six insurers had become exchange members, including the four initially announced, as well as Taikang Life and Taiping Life.

According to the trading rules of the Shanghai Gold Exchange, members participate directly in transactions using their trading seats; non-member clients must first open accounts and obtain client numbers through authorized member institutions, which then act as agents for trading.

The entry channel for insurers to invest in gold has now opened, and the actual investment pace remains cautious. Recently, interviews with some insurers qualified for the pilot revealed that their overall gold investment proportion remains low. The main reasons include the early stage of the pilot, the rapid rise of gold prices in 2025, and the ongoing development of professional gold investment teams.

The “Notice” stipulates that pilot insurers must strictly adhere to investment ratio requirements, with the total book balance of gold investments not exceeding 1% of the company’s total assets at the end of the previous quarter. Based on this, the theoretical maximum gold allocation for the 10 pilot insurers is nearly 200 billion yuan.

However, none of the insurers have provided specific current allocation data. One insurance executive disclosed that their company’s gold investment ratio is very low—partly because gold prices have surged and hit new highs in 2025, and partly because their professional gold investment team is still being built. Although they have attempted some allocations, they remain cautious overall. The executive noted that long-term, gold prices are volatile, and insurers need to consider their liabilities carefully. They will continue to monitor gold price trends and adjust their allocations accordingly.

Lu Xiaoyue, one of the founders of Yan Shu Asset Management, told Securities Daily that the participation of insurance funds in gold investment is still in its early stages, with limited coverage, and last year’s significant gold price increase means insurers are still exploring gold investment strategies.

Professor Zhu Junsheng, a postdoctoral researcher in applied economics at Peking University, told Securities Daily that during this pilot phase, regulators strictly limit the proportion of insurance funds involved in gold investment. Insurers mainly adopt defensive allocations and are gradually gaining experience. He also pointed out that gold prices are currently at a historical high, with short-term valuation digestion and phase correction pressures, which somewhat reduce the short-term cost-effectiveness of investing in gold.

Long-Term Strategic Value of Gold Allocation

The cautious short-term approach to gold investment by insurers does not negate gold’s value. This prudence reflects the long-term, steady investment nature of insurance funds.

Interviewees believe that short-term caution does not change the long-term allocation logic. From a medium- to long-term portfolio perspective, the value of gold is increasing. In the future, gold will have strategic allocation value for insurance funds, but its appeal will not be reflected in short-term nominal returns, rather in optimizing asset portfolio structures.

According to the “Notice,” the scope of pilot insurance funds’ gold investments includes: gold spot contracts listed or traded on the Shanghai Gold Exchange’s main board, deferred delivery contracts, Shanghai Gold centralized pricing contracts, inquiry-based spot contracts, inquiry-based swap contracts, and gold leasing business. This allows pilot insurers to participate in gold markets through standardized and diversified tools, further enhancing asset allocation diversification.

Zhu Junsheng explained that, on one hand, gold has low long-term correlation with stocks and bonds, so allocating a certain proportion of gold can reduce overall portfolio volatility—especially important for risk-constrained insurance funds. On the other hand, gold’s hedging ability against other risk assets in extreme scenarios is superior to traditional financial assets. Additionally, market expectations that the Federal Reserve will continue to cut interest rates could lower the opportunity cost of holding gold, supporting its medium- to long-term price.

In the long run, research institutions and insurers agree that gold can optimize asset-liability management. Guolian Minsheng Securities analyzed in a report that, as a medium- to long-term holding asset, gold can help insurers improve the matching of assets and liabilities, especially suitable for long-term liabilities like life and annuity insurance, serving as a stable option to balance long-term liability pressures.

A senior executive from Ping An Life told reporters that since the gold investment pilot was launched, the company has attached great importance to the role of gold assets in portfolio allocation and actively promoted related work. From the market environment, gold currently has good investment value globally; from a portfolio perspective, increasing gold holdings helps diversify risk and reduce overall volatility. Going forward, Ping An Life will continue to adhere to prudent allocation and risk control within regulatory limits, improve its gold investment research and infrastructure, and further optimize its diversified asset allocation.

Lu Xiaoyue stated that gold, as an interest-free asset, mainly provides inflation hedging. In mature foreign markets, large European insurers often allocate gold for ultra-long-term pension funds, with some holding periods spanning decades and crossing multiple economic cycles. Gold can serve as a ballast in matching such liabilities.

However, international experience must be adapted to domestic realities. Zhu Junsheng noted that domestic insurers should consider their own characteristics when drawing lessons from Europe. For example, since gold does not generate interest or dividends, it can drag down current earnings under China’s current assessment system, requiring policy adjustments to better buffer the downward pressure from declining interest rates. Additionally, from product structure and capital stability perspectives, short-term wealth management or highly liquid products still dominate, which carry redemption risks and are somewhat misaligned with gold’s “long-term holding, short-term volatility” nature. This also indicates that gold allocation tests the maturity of insurers’ asset-liability structures.

Looking ahead, Zhu Junsheng believes that if initial pilot investments show that gold allocation does not significantly impair solvency and can improve portfolio risk profiles, it could set a demonstration effect. Future expansion of the pilot is highly likely, but the pace will remain cautious and gradual. He recommends gradually expanding coverage based on pilot results, incorporating gold into the routine investment categories of insurance funds.

On the regulatory front, Zhu Junsheng suggested: first, optimize the solvency framework and reasonably lower the risk factors for gold investments; second, improve accounting treatment, reflecting long-term fluctuations through comprehensive income to reduce impacts on current profits; third, guide insurers to integrate gold allocation with liability duration management to prevent short-term, trading-oriented behaviors.

“The safer approach is to implement small, gradual allocations during the pilot phase, and only after institutional and market conditions mature, increase its strategic weight in the asset mix,” Zhu Junsheng said. Whether gold is worth allocating long-term depends on whether the insurer’s liability structure permits it. The proportion to allocate depends on regulatory environment and the maturity of the insurer’s internal governance.