Chinese consumers are increasingly turning to gold as a means to safeguard their assets amidst economic volatility, a depreciating yuan, and stagnant property markets. Analysts anticipate this trend to persist, driving international gold prices higher alongside geopolitical uncertainties.
According to data released by the China Gold Association, gold purchases by Chinese consumers surged by 5.9% year-on-year in the first quarter of the year, reaching 308.9 tonnes (10.9 million ounces). Notably, purchases of gold bars and coins, reflecting investment and hedging demand, witnessed a remarkable 26.8% increase to 106.3 tonnes, while gold jewelry sales saw a modest decline of 3% to 183.9 tonnes.
However, despite the surge in consumer demand, China’s domestic gold production only rose by 21.2% to 139.184 tonnes in the same period, indicating an increasing dependence on imported ores and materials.
Professor Chen Zhiwu from the University of Hong Kong highlighted that gold is viewed as the only secure asset for Chinese consumers to safeguard their wealth against inflation, declining asset prices, and geopolitical risks. He predicts a continued rise in Chinese household demand for gold, alongside increased gold purchases by the Chinese central bank to hedge against geopolitical uncertainties.
As of the latest data, the benchmark London gold price has surged to US$2,337.6 per ounce, marking a significant 13.5% increase since the beginning of the year and a staggering 54.1% increase since the start of 2020. The Bank of China attributes this surge in gold prices to heightened demand from global central banks, coupled with robust gold demand in the Chinese market.
China’s central bank, in particular, has been consistently increasing its gold reserves, with March marking its 17th consecutive month of gold bullion purchases. This move aims to diversify reserves away from US bonds amid strained bilateral relations.
The ongoing instability in China’s stock market, coupled with declining interest rates and reduced returns on wealth management products, has further heightened the appeal of gold as a safe-haven asset. This appeal is expected to drive continued robust demand for gold in China, supporting upward momentum in gold prices.
Gary Ng, senior economist at Natixis Corporate and Investment Bank, emphasized that the China story, alongside global risk-off sentiment, is bolstering gold prices. He expects China’s demand for gold to remain resilient in 2024, while acknowledging that the US’s ability to manage inflation will also play a significant role in determining future gold prices.
