Chinese Traders Key to Next Gold Surge
Traders on the Shanghai Futures Exchange have played a key role in driving gold’s bull market over the past two years, and they may soon help push gold over $5,000.
Ever since gold’s bull market took off in the spring of 2024, I’ve been tracking a fascinating phenomenon: Chinese traders on the Shanghai Futures Exchange (SHFE) have played a significant role in driving each surge of the bull market, while Western investors have been late and hesitant to join in. You can learn more about this phenomenon from a Financial Times article and a Bloomberg article, though both are behind paywalls.
Because of that, I’ve been paying close attention to the gold futures contract traded on the SHFE and performing technical analyses on it, as well as monitoring its trading volume to get an idea of when the next surge might begin. I will do that today, and I can already see a setup that is likely to lead to the next rally.
As I’ve been showing in recent weeks, a triangle pattern has been forming in gold. This marks the third such pattern in the past year. The previous two, which appeared in the winter of 2024 and the summer of 2025, both resulted in powerful surges. Given that history, I am now watching the current pattern closely to see if it will lead to a similar move. Notably, the same triangle is also forming in SHFE gold futures, where a breakout has yet to occur.
I am now watching the triangle in SHFE gold futures along with trading volume, waiting for a breakout that will signal gold’s next rally is about to take off, not just in China but worldwide. In addition to a breakout in Shanghai gold futures from its triangle pattern, I am holding out for a breakout above the 1,000 yuan per gram resistance level because breakouts from horizontal resistance levels are much more reliable and meaningful than breakouts from diagonal resistance levels such as the top of the triangle pattern.
It is very important to see volume surge upon both the breakout from the triangle and the move above the 1,000 yuan resistance level for confirmation, because that means the breakout is far more likely to succeed rather than fizzle out, as I explained in my detailed tutorial yesterday.
One of the key features of gold’s initial breakout in March 2024 was the surge in trading volume on the SHFE, as highlighted in the Financial Times article from that period titled “Chinese speculators super-charge gold rally.” The volume chart below is taken from that article. This is why monitoring trading volume in SHFE gold futures is so important.
The Financial Times article also showed how open interest in SHFE gold futures surged as speculators piled in, a behavior that is likely to repeat if the current triangle pattern breaks out successfully. However, open interest is more difficult to track for those outside of China.