Chinese Gold Consumption Boomed in January

Chinese gold consumption boomed during the January holiday season. This continued the 2021 trend where Chinese gold demand climbed back above prepandemic levels.

China ranks as the world’s number one gold consumer.

According to the latest data from the World Gold Council, manufacturers withdrew 186 tons of gold from the Shanghai Gold Exchange (SGE) in January. That was a small 4% m-o-m decline but a substantial 16% increase year-on-year. It was also well above the 2021 monthly average of 146 tons.

Gold imports into China were strong last year. According to the latest data released by China Customs, the country imported 818 tons of gold in 2021. That was 36% higher than 2020 and was close to the prepandemic level in 2019.

The expected strong demand for gold during the Chinese New Year holiday did not disappoint. According to the Shanghai Gold Jewellery Association, gold jewelry consumption in Shanghai reached 1.1 billion yuan during the Chinese New Year holiday. That represents a 12% y-o-y increase.

Total Chinese gold demand came in at 1,120.9 tons in 2021, according to data released by the China Gold Association.

The was a sharp increase in demand for physical investment gold in China. Gold bar and gold coin sales were up 26.87% to 312.86 tons. The World Gold Council projects gold bar and gold coin sales in China could get a further boost in the coming months from three key factors.

• rising inflationary pressure
• lowering local bond yields
• a weaker RMB

The WGC pinpointed three more dynamics that could further impact the Chinese gold market in the coming year.

• Greater pricing transparency in China’s gold jewelry market
• Shifting tastes and mindset of the young towards gold jewelry as an investment as well as a consumer good
• A greater push from commercial banks in bar and coin sales as their other retail gold business remain restricted

Meanwhile, on the supply side, the world’s biggest gold producer reported a drop in mine output. Gold production at Chinese mines declined by 9.95% year-on-year to 328.98 tons.

According to the Global Times, the Chinese government implemented macroeconomic policies aimed at bolstering domestic gold consumption last year.

Last spring, China gave the green light for the import of 150 tons of gold. The report notes that China’s returning appetite for gold could potentially “support global prices.” Reuters called the size of the expected Chinese gold imports a “dramatic return to the global bullion market.”