Demand for gold in China, the world’s biggest market for the precious metal, is far outstripping supply, causing a spike in prices for the Chinese. The premium for an ounce of gold in Shanghai topped $43 an ounce compared to the London benchmark during late September. Adding to the upward price pressure is a sharp drop in the value of the Chinese yuan against the U.S. dollar, since gold is priced in dollars on international markets.

As Chinese authorities have lifted quarantines in some major cities, demand for gold has rebounded sharply. For example, following a shutdown of Shanghai’s financial center in the spring to limit the spread of COVID-19 demand for gold jewelry quickly bounced back.

As demand is spiking, the supply of gold remains limited by the government. The People’s Bank of China, the nation’s central bank, sets the amount of gold that may be imported, and only accredited banks may do so.

China’s gold imports via Hong Kong jumped to a four-year high in August, topping 68 metric tons. Yet there remains a supply shortage in China, so the government is expected to increase quotas for gold imports. If it does so, Chinese demand for the precious metal should provide support for the global price of gold.