Chinese Gold Demand Rebounds in First Half of 2021

Chinese gold demand rebounded sharply in the first half of 2021 after plummeting in 2020, according to data released by the China Gold Association (CGA).

China ranks as the world’s number one gold consumer and the Chinese market has a significant impact on global demand.

Chinese gold consumption came in at 820.98 tons in 2020. That was an 18.1% drop from the 2019 level. The biggest dropoff was in jewelry sales, down 27.5% year-on-year.

Even as overall gold demand dropped last year, coin and bar investment grew by a healthy 9.2%.

Industrial demand for gold fell 16.8% last year, according to the CGA report.

But the gold market bounced back in H1 2021. Demand was up 69.2%, coming in at just over 547 tons through the first 6 months of the year. China’s year-on-year gold consumption surged 93.9% in the first quarter alone.

Gold demand wasn’t just up compared to 2020, a year of economic distress due to coronavirus. It was up 4.49% above pre-pandemic levels in 2019.

With the surging demand for gold, Chinese imports have also returned to pre-pandemic levels. According to the data reported by the World Gold Council, China imported 67.6 tons of gold in May. That was 65 tons higher than May 2020 and only three tons lower than May 2019.

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

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.”

China also ranks first in the world in gold production, but mine output fell by 3.91% to 365.35 tons last year. The pandemic wasn’t the only disruption. Increased government environmental regulations also put a drag on mine production.

While gold demand rebounded in the first half of 2021, Chinese mine output did not. Gold production fell 10.2% to just 152.8 tons. According to the Global Times, work accidents disrupted gold mine output in gold-producing East China’s Shandong Province.

The world’s second-largest gold market – India – has also shown signs of renewed life.

The pandemic crushed Indian gold demand, particularly for gold jewelry, but record-high gold prices in rupee terms and government policy put a drag on the gold market even before COVID-19. There were signs of a turnaround late last year and it continued through the first quarter of 2021. The most recent wave of COVID-19 stalled the gold Indian gold market’s recovery, but it appears to be regaining steam.