Record High Gold ETF Inflows
China’s investment sentiment towards gold experienced a notable increase in the second quarter of this year, with a growing anticipation of heightened investor interest in this safe-haven asset, as reported by the World Gold Council (WGC). In the second quarter, gold exchange-traded funds (ETFs) in China saw inflows of approximately 14 billion yuan ($2 billion) or 25 metric tons, setting a new record high. The ongoing trend of rising gold prices led to continuous inflows into Chinese gold ETFs throughout the first half of the year, resulting in a 50% surge in holdings and a 77% rise in assets under management.
Insight: The record inflows into gold ETFs in China reflect a strong belief in the metal’s stability and value, especially in times of economic uncertainty. As geopolitical tensions and market volatility persist, investors are increasingly turning to gold as a reliable investment option.
Surge in Gold Bars and Coins
Investment in gold bars and coins in China reached 80 tons in the second quarter, showing a significant 68% year-on-year increase and marking the best Q2 performance since 2013. The demand for wealth preservation amidst escalating gold prices contributed to a total investment of 190 tons in gold bars and coins during the first half of the year, representing a noteworthy 65% jump from the same period in the previous year.
Insight: The rising interest in physical gold as reflected in the surge of investment in bars and coins signals a preference for tangible assets that can serve as a store of value in uncertain times. This trend underscores the long-standing appeal of gold as a safe haven asset that transcends market fluctuations.
Wang Lixin, CEO of the World Gold Council (China), expressed a cautious outlook on the future demand for physical gold in the latter part of the year, citing the possibility of increased interest in safe-haven investments due to declining domestic interest rates and potential pressure on local assets. However, uncertainties in gold price trends could moderate demand for bars and coins later in the year.
Decline in Gold Jewelry Demand
On the contrary, demand for gold jewelry in China hit a Q2 low not seen since 2009, totaling 86 tons, impacted by high gold prices and a slowdown in economic growth. The first half of the year witnessed an 18% year-on-year decrease in jewelry consumption to 270 tons. Wang noted that seasonal factors might lead to a slight uptick in domestic demand for gold jewelry in the second half of the year.
Global Gold Demand and Prices
Globally, gold demand surged to a record high of 1,258 tons in the second quarter, signaling a 4% year-on-year increase that drove prices upwards. The average gold price for the quarter stood at $2,338 per ounce, marking an 18% rise compared to the previous year, with a peak of $2,427 per ounce in May.
Central Bank Reserves and Technological Use
In Q2, global central banks augmented their gold reserves by 184 tons, reflecting a 6% year-on-year growth, albeit at a slower pace compared to the previous quarter. Despite China’s central bank maintaining its gold reserves at 2,264 tons in May and June following 18 straight months of increases, global central banks are projected to persist in expanding their gold holdings over the next year.
Gold usage in technology surged by 11% year-on-year in the first half of the year, propelled by the growing trend of artificial intelligence (AI) utilization.
Retail Gold Bar and Coin Investment
Global retail investment in gold bars and coins declined by 5% to 261 tons in the second quarter, largely due to weak demand in Western markets. The record high gold prices also had an impact on global jewelry consumption in Q2, with volumes dropping by 19% year-on-year to a four-year low of 391 tons. Additionally, there was a minor 7-ton decrease in global gold ETF holdings in the second quarter according to the WGC.
Investors are advised to consider their financial situation, investment goals, and risk tolerance before making any decisions. Consulting a qualified financial advisor is recommended for personalized investment advice.
