Chinese Investors Turning to Gold

Chinese investors are turning to gold.

China Daily called the demand for gold “robust” through the first three quarters of 2023 and said it is expected to continue “as economic and geopolitical uncertainties may drive up investors’ purchases of safe-haven assets.”

China ranks as the world’s biggest gold market, and Chinese demand has a significant impact on the global gold market.

Chinese demand for gold bars and gold coins came in at 82 tons in the third quarter, despite surging gold prices in yuan terms. It was a 16% increase year-on-year and the strongest Q3 Chinese gold investment demand since 2018. It was also above both the five-year and 10-year third-quarter averages.

Through the first nine months of 2023, investment gold demand was up 26% compared to 2022.

WGC CEO Wang Lixin told China Daily, “The rising interest in gold bars and coins was primarily driven by investors’ safe-haven demand, supported by global geopolitical instability and weak performance of investment products denominated in Chinese yuan.”

The spread between domestic and international gold prices was another reason behind the gold investment demand boom. On Sept 14, the single-day price difference reached a historic high of $121 per ounce.

Wang also mentioned central bank gold buying as a catalyst for investor demand in China.

Since the beginning of the year, the People’s Bank of China has increased its reserves by 181 tons, and it has added 232 tons since it resumed official purchases in November 2022. As of the end of September, China officially held 2,192 tons of gold, making up 4% of its total reserves.

Chinese investors have also put money into gold-backed ETFs. As a result, ETF gold holdings rose by 9.53 tons in the third quarter alone. Total gold holdings in China-based ETFs stand at around 57 tons.

China Daily reported a 12.2% increase in gold and silver jewelry sales through the first three quarters of 2023. According to the president of the Gems & Jewelry Trade Association of China, the increase in jewelry sales was nearly double the growth in the overall retail sector.

Wang told China Daily that the post-COVID economic recovery was a significant driver of the resurgence in domestic gold jewelry demand. He said pent-up demand for wedding jewelry since last year also provided a boost.

According to China Daily, jewelry exports have recovered to pre-pandemic levels, with the total value of precious jewelry exports reaching about 66.7 billion yuan in 2022. That represents an 18% increase compared to 2019. The overall export value of jewelry from January to June 2023 came in at 39.4 billion yuan, a 13.3% increase over the same period last year.

Overall, Chinese gold demand was up 7.3% year on year through the first nine months of 2023.