The Chinese gold market showed seasonal strength in December, but wholesale demand finished the year below the 10-year average.
Total gold withdrawals from the Shanghai Gold Exchange, a gauge for wholesale demand, rose by 24 percent month-on-month in December. Withdrawals totaled 122 tons.
In another sign of improving Chinese gold demand, the Shanghai-London price spread turned positive toward the end of the month.
Anecdotally, the World Gold Council reported that Chinese jewelry wholesalers and manufacturers said showrooms were busier in December and retailers stocked up for an anticipated sales boom to kick off the new year.
Shanghai Gold Exchange withdrawals in 2024 totaled 1,455 tons. That was down 15 percent from 2023 and about 22 percent below the 10-year average.
Gold demand in China started 2024 hot, helping drive the early stages of last year’s gold bull rally that sent prices to record levels. But as prices climbed, gold demand in China sagged as price-sensitive consumers put off purchases. According to the World Gold Council, there was notable weakness in jewelry consumption “the major component of China’s gold demand.”
The same factors that put a drag on gold jewelry demand supported investment buying, helping mitigate some of the slowdown in jewelry purchases.
China ranks as the world’s biggest gold-consuming country. Notably, prices continued to climb even as Chinese demand lagged.
Chinese gold investment demand was reflected in record inflows of gold into Chinese ETFs. Gold holdings by Chinese funds reached a record of 115 tons, with a 7.5-ton increase in December. Total assets under management by Chinese ETFs grew to $9.7 billion, also a new record.
The total AUM of Chinese gold ETFs surged by 150 percent during the year, as physical gold holdings soared by 87 percent.
According to the World Gold Council, “The depreciating RMB and plummeting government bond yields – amid economic uncertainties and intensifying expectations of continued rate cuts – drove investors to gold.“
The announcement that the People’s Bank of China resumed officially adding gold to its reserves also likely boosted investor interest.
Gold imports ticked up in October and November, reflecting a resurgence of demand. After rising 39 percent month-on-month in October, imports charted another 36 percent in December, totaling 108 tons. According to the World Gold Council, this reflected a seasonal increase in demand.
Looking ahead, the World Gold Council projects “a seasonal pick up in gold jewelry consumption due to the peak buying season over the Chinese New Year holiday – from 28 January to 4 February.” The WGC also expects investment demand to continue to find support from falling government bond yields and a weak yuan driven by central bank rate cuts and worries about U.S. tariffs.
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