Chinese Gold Market Continues Post-Pandemic Recovery

The Chinese gold market continues to show signs of recovery after it was hit hard by the coronavirus pandemic.

Chinese gold demand rebounded sharply in the first half of 2021 after plummeting in 2020, and imports remained strong in July, above 2019 levels, according to the latest data from the World Gold Council.

China ranks as the world’s largest gold consumer.

China imported 66.6 tons of gold in July. That was down modestly from 68.6 tons in June, but 22.9 tons higher year on year. Demand remained healthy despite regional outbreaks of the COVID-19 Delta variant.

Overall gold 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.

Wholesale demand for gold has rebounded and this is reflected in rising premiums. The average local gold price spread rose to US$5.8/oz in August, US$4.1/oz higher m-o-m.

According to the World Gold Council, the environment continues to look positive for demand. China’s physical gold demand in the coming months may benefit from seasonal purchases. With holidays approaching in September and October, consumers generally spend more on discretionary items such as gold jewelry, potentially creating higher wholesale physical gold demand.

Chinese investors are also showing interest in the yellow metal. Chinese gold ETFs saw inflows for the third straight month in August, bringing collective holdings to 70.4 tons.

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.”

In addition to importing tons of gold, China ranks as the world’s biggest gold producer. 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.