Q1 Gold Demand in China Hit Highest Level Since 2019

After ending 2022 on an upward trend, China’s gold market continued to rebound during the first quarter of 2023.

Wholesale gold demand in China during Q1 hit the highest first-quarter level since 2019. Meanwhile, gold imports charted the strongest start to a year since 2015.

China ranks as the world’s biggest gold market.

Gold withdrawals from the Shanghai Gold Exchange (SGE), an indicator of wholesale demand, totaled 157 tons in March. That was a minor month-on-month decline of 13 tons, but a 57-ton year-on-year rise. February’s withdrawals were at the highest levels in eight years.

Local gold withdrawals totaled 465 tons in Q1, the highest since 2019 before the COVID pandemic.

According to the latest update from China Customs, the country imported 166 tons of gold in February. That was a significant increase from January’s 76 tons. And while the January total appears low, it was a big improvement. According to the World Gold Council, although the Chinese New Year’s (CNY) holiday limited the number of working days, January was the strongest CNY month of gold imports since 2020 amid the notable demand improvement after the end of the zero-Covid policy.

January and February’s combined gold imports of 242 tons represented the strongest start to a year since 2015. This coincides with robust wholesale gold demand during the same period.

After a weak first half of 2022, gold demand in China surged during the last half of the year as the government relaxed COVID restrictions. With demand rebounding through the last two quarters, China imported 1,343 tons of gold in 2022, the highest import level since 2018. Total gold imports for the year were up 64% over 2021.

In another sign of improvement in the Chinese gold market,  in March, gold ETFs based in China reported the first month of net inflows of gold in 2023.

Looking ahead, the World Gold Council said seasonal patterns suggest a slowdown in local gold consumption that could weigh on wholesale gold demand in April and May. But there may be upside potential, according to the WGC. While the recent local gold price rally might deter some consumers, it attracts the attention of investors, especially when they continue to prioritize saving and are prepared to invest more.

Also, as we’ve reported, the People’s Bank of China resumed official gold purchases in November. That continued into March, with the Chinese central bank adding another 18 tons to its reserves. Over the last five months, Chinese gold reserves have increased by 120 tons, based on official reported numbers. That increase took China’s total gold reserves to 2,068 tons.

There has always been speculation that China holds far more gold than it officially reveals. As Jim Rickards pointed out on Mises Daily back in 2015, many people speculate that China keeps several thousand tons of gold “off the books” in a separate entity called the State Administration for Foreign Exchange (SAFE).

If this apparent rebound in the Chinese gold market continues deeper into 2023, it will drive overall global gold demand higher. Gold demand grew by 18% to 4,741 tons in 2022, the highest demand in 11 years.