The World Gold Council released a report on Tuesday indicating a rebound in demand across Chinese gold markets in September, coinciding with the country’s preparation for the National Day Holiday in early October. Ray Jia, head of research, China, at World Gold Council, expressed optimism about the future, expecting gold demand to continue to improve as China enters the peak seasons for gold consumption.
Increased Demand with Room to Grow
Despite a notable 11% month-over-month rebound in gold withdrawals from the Shanghai Gold Exchange in September, total withdrawals are still 18% below the 10-year average. This suggests there is potential for further growth in gold consumption in China. Additionally, Chinese gold ETF flows turned positive in September, reaching assets under management of about $7.8 billion, or 91 tonnes.
Insight: The positive trend in gold withdrawals and ETF flows in China indicates a growing interest in gold as an investment and a store of value amidst economic uncertainties.
Gold Outperforms in 2024
Gold has shown impressive performance compared to Western and Chinese investment alternatives in 2024, with a gain of about 30% so far. This outperforms Chinese commodities, which are up just 10% for the year, and the S&P 500, which has seen a 19% increase. Gold priced in renminbi has also outperformed the Chinese CSI300 stock index, reinforcing its status as a strong investment option.
Insight: The consistent performance of gold highlights its role as a stable asset in uncertain times, attracting investors seeking safety and value preservation.
Central Bank Taking a Hands-Off Approach
While physical gold demand has increased globally, the Chinese central bank has refrained from making reported purchases of gold for the past six months. Despite this, China imported just 10 tonnes of gold in August, the lowest amount since February 2021. Global central banks are not mandated to report their gold holdings, creating some uncertainty about the actual demand for the precious metal.
Insight: The central bank’s pause in gold purchases could reflect a strategic decision based on economic conditions and policies, impacting the overall market perception of gold in China.
Overall, the data presented by the World Gold Council indicates a mixed outlook for gold in China, with signs of increasing demand, but also some cautious sentiments from the central bank. Investors and analysts will continue to monitor these trends to gauge the future trajectory of gold in the Chinese market.
