Gold News

China's Private Gold Demand Nears 1% of GDP at Record Prices

Wholesale SGE gold buying +30% year-on-year by Yuan value...
CHINA's GOLD DEMAND in the first quarter rose to the highest by weight in 5 years according to data from the Shanghai Gold Exchange, and it hit a near-decade high in value terms as a proportion of the No.1 gold buying nation's gross domestic product.
China reported solid GDP growth last week, with the world's 2nd largest economy expanding by 5.3% in January-to-March from the same period last year on figures from NBS, Beijing's official data agency.
But with China's property market continuing to fall, its stock market hitting 5-year lows, and cash interest rates stuck at historic lows, Chinese households and investors have poured money into gold, helping drive the global price up to new record highs at $2400 per Troy ounce of gold bullion in London and above ¥500 per gram in Shanghai.
To feed this trend, wholesale gold demand through the Shanghai Gold Exchange – the only legal route for bullion to enter private circulation in China – rose 12.3% by weight in January-to-March from the first quarter of 2023, reaching the heaviest Q1 total since 2019 on SGE withdrawals data.
The first quarter includes the key Lunar New Year and Spring Festival holiday, now the busiest gold-buying season worldwide, beating India's autumn festival of Diwali.
But on top of that seasonal gifting demand, the start of 2024 saw such strong private-sector investment in China that the value of its wholesale gold demand leapt 30.3% from a year earlier, beating Q1 2019 by 71.3% and equating to 0.86% of the country's GDP on analysis by BullionVault – the highest first-quarter proportion since 2015.
Chart of first-quarter SGE gold withdrawals as a percentage of China's Q1 GDP. Source: BullionVault
"As we [now] enter the traditional 'off season' for demand," says Ray Jia, research head China for the mining industry's World Gold Council, "gold jewellery consumption is likely to remain tepid, especially with a local gold price that keeps refreshing record highs.
"[But] the shining performance of gold compared to other local assets has attracted increasing attention from investors. And this could mean continued strength for gold investment demand in China."
Alongside further falls in China's property sector, Q1 2024 saw China's CSI300 stock-market index hit 5-year lows, bottoming at less than half its value at the peak of early 2021.
Yuan gold prices in contrast rose 10.1%, setting a new all-time record high on 13 out of the first quarter's 59 trading days at the SGE and averaging a record quarter-average premium to London quotes of $40 per Troy ounce – five times the typical incentive for new bullion imports.
"As domestic assets such as equities and real estate weakened," says trade body the China Gold Association, "the impressive performance of the gold price in Renminbi has attracted [Chinese] investors looking for safe-haven assets, which led to continued demand."
Retail-store demand for gold coins and small bars is "booming" says investment-news website STCN, and people "are also enthusiastic about investing in gold through mobile and online banking" plus major platforms Ant Fortune, Finance, and Tencent Financial Management Connect.
Gold's No.1 mining, importing, central-bank buying and private consumer nation, China accounts for 1-in-6 people on Earth.
"Gold prices are high and trading is hot," says China's Securities Times, with speculative betting on gold prices through the Shanghai Futures Exchange also jumping so far in 2024.

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