Traditionally Q2 is a seasonally quiet time for gold demand in China. Available data for April shows that the average monthly trading volumes on the Shanghai Gold Exchange -- usually seen as a high-frequency indicator for China’s physical gold demand --declined over the month.
But with the elongated International Labour Day holiday starting on 1 May, and the pandemic currently being well contained, gold demand could receive a boost during this offseason. The World Gold Council (WGC) also expected that wedding jewellery demand might offer substantial support as many couples plan to hold their delayed weddings during the upcoming holiday. This reflected in an $11/oz average local gold price premium during April, $3.6/oz higher than March.
During April there were indications that the People’s Bank of China has permitted imports of ~150t of gold.
Recent data from China Customs showed imports of 38t in March, 32t higher m-o-m and 20t higher y-o-y. The pandemic-stricken March of 2020 and fewer working days in February 2021 were the main reasons for the sizable increases.
Chinese gold consumption has surged so far in 2021, while imports have been somewhat muted since early 2020, resulting in tightening supply-demand conditions and a domestic gold price spread. Potentially higher imports in Q2 shows that Chinese gold demand could remain higher says WGC.
Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough&Polished
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