According to data from the World Gold Council, China ranks as the world’s biggest gold market. While the price of gold declined in dollar terms last month, it was up 1.8% in yuan due to Chinese currency weakness.
Gold withdrawals from the Shanghai Gold Exchange (SGE) totalled 161 tons last month, reflecting strong wholesale demand for gold. This represented a 46-ton month-on-month increase. Year-on-year, withdrawals from the SGE were down a modest 5 tons.
With Chinese Valentine’s Day and various jewellery fairs scheduled in September, it is likely to boost retail demand this month. Also reflecting strong domestic gold demand, the Shanghai-London gold price spread averaged $40/oz in August. This was a $23 per ounce month-on-month increase.
Meanwhile, China imported 107 tons of gold in July, 9 tons higher than June’s total. Compared to last year, imports were down 69 tons. During July, poor equity market performance and continued local currency weakness drove many to gold, which has delivered attractive returns so far in 2023.
The People’s Bank of China added more gold to its reserves in August. It was the 10th straight month of gold buying for the Chinese central bank with an addition of 29 tons. The PBoC now officially holds 2,165 tons of gold. The various jewelry fairs and industry events may see manufacturers’ and retailers’ replenishing demand. However, high gold prices could create some headwinds for the Chinese gold market.
Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough & Polished
