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 State Financial Supervision and Administration launched the pilot program for insurance funds to invest in gold, making the movement of insurance funds into gold naturally a market focus.

So, have insurance funds already entered the market in large numbers? Recently, exclusive information from several insurance companies revealed 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 caution among insurers 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 Allocations

On February 7, 2025, the National Financial Supervision and Administration issued the “Notice on Conducting a Pilot Program for Insurance Funds Investing in Gold” (hereinafter referred to as the “Notice”), officially allowing insurance funds to participate in gold investment pilot projects, with the first batch of pilot entities including 10 insurers.

After the pilot qualification was granted, these insurers gradually began to set up their strategies. 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 their actual investment pace remains cautious. Recently, when interviewing some insurers with pilot qualifications, exclusive information indicated that the overall proportion of gold investment among insurers 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 business leader revealed 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 leader noted that long-term, gold prices are volatile, and insurers need to consider their liability characteristics 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 sharp increase in gold prices 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. It is also important to note 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 actually 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 investing in gold includes: gold spot contracts listed or traded on the Shanghai Gold Exchange main board, gold deferred delivery contracts, Shanghai Gold centralized pricing contracts, gold inquiry spot contracts, gold inquiry swap contracts, and gold leasing business. This means pilot insurers can participate in gold market investments through standardized, 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 significantly better than 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 asset and liability durations, especially suitable for long-term liabilities like life and annuity insurance, serving as a stable option to balance long-term liability pressures.

A representative 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 allocation helps diversify risk and reduce overall volatility. In the future, 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 structure.

Lu Xiaoyue stated that gold is an interest-free asset whose core value lies in its anti-inflation properties. From mature international 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 pointed out that domestic insurers need to consider their own characteristics when drawing on European experience. 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 impact of declining interest rates. Additionally, given the product structures and capital stability, short-term financial or high-liquidity products still dominate insurers’ portfolios, which carry redemption risks and are somewhat mismatched with gold’s “long-term holding, short-term volatility” nature. This also indicates that gold allocation is a comprehensive test of an insurer’s asset-liability management maturity.

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

On the regulatory front, Zhu Junsheng suggested: 1) optimizing the solvency framework and reasonably lowering the risk factors for gold investments; 2) improving accounting treatment, reflecting long-term fluctuations through comprehensive income to reduce impacts on current profits; 3) guiding insurers to deeply 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 increase its strategic weight in the asset portfolio once the system and market conditions mature,” 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 insurer’s internal governance maturity.