Sustained Growth in China’s Gold Market
April 2024 marked another significant month for the gold market in China, showcasing a continued rise in both the Shanghai Gold Benchmark PM (SHAUPM) and the LBMA Gold Price AM. This persistent momentum highlights the robust investment demand which has notably offset the weaknesses in the gold jewelry sector.
Key Market Movements in April
Strong Withdrawals from Shanghai Gold Exchange
The Shanghai Gold Exchange (SGE) reported gold withdrawals totaling 131 tonnes in April, reflecting a 7-tonne month-over-month increase and a 10-tonne year-over-year rise. This uptick indicates a strong investment demand that continues to dominate the Chinese market, counterbalancing the softer gold jewelry consumption.
Record Inflows into Chinese Gold ETFs
Chinese gold ETFs experienced their fifth consecutive month of inflows, adding an impressive RMB 9 billion (approximately US$1.3 billion, or 17 tonnes). This surge has pushed both holdings and total assets under management (AUM) to new record highs, affirming the heightened investor interest in gold amid fluctuating market conditions.
Continuing Purchases by The People’s Bank of China
The People’s Bank of China (PBoC) has consistently increased its gold reserves for 18 consecutive months, with a 2-tonne addition in April alone, bringing the total to 2,264 tonnes. This strategic accumulation now represents 4.9% of the PBoC’s total reserves, underscoring the central bank’s confidence in gold as a key component of national financial stability.
Market Outlook and Consumer Behavior
Jewelry Consumption and Investment Demand
While gold jewelry consumption saw a decline during the early May Labour Day holiday due to high gold prices, investment demand also showed signs of deceleration towards the end of April and into early May. The volatile gold price environment has led investors to adopt a cautious stance, awaiting clearer signals before making further commitments.
Future Trends in Jewelry and Investment
Looking ahead, it is anticipated that jewelry consumption may continue to experience weakness, influenced by both seasonal trends and elevated gold prices. However, the ongoing need for value preservation and the high profile of gold as an investment asset are expected to keep investment demand buoyant in the Chinese market.
Monthly Market Performance
Gold Price Movements
In April, the LBMA Gold Price AM in USD saw a 5% increase, while the SHAUPM in RMB recorded a smaller rise of 3%. These gains were driven by heightened geopolitical risks and active futures trading, reflecting gold’s resilience as a preferred asset amid global uncertainties.
Comparing Asset Performances
Gold continued to outperform other major assets in 2024, with the RMB gold price return reaching 14% year-to-date. This performance has attracted significant attention from local investors, bolstering the overall strength of gold in investment portfolios.
Wholesale Demand and Local Premiums
April’s wholesale gold demand was robust, with the local gold price premium rising to US$42 per ounce. This increase mirrors the strong investment demand seen in the first half of the month, although a later pullback in prices tempered the momentum somewhat.
Record-Setting Trends
Chinese gold ETFs not only maintained their growth trajectory but also recorded the highest monthly inflow ever in April. This peak in demand reflects ongoing investor confidence in gold, despite some cooling in the latter part of the month.
Conclusion: A Dynamic Landscape
China’s gold market in April 2024 illustrated a dynamic interplay between robust investment demand and fluctuating jewelry sales. With the PBoC’s strategic gold purchases and the record-setting performance of gold ETFs, the market landscape continues to evolve, driven by both domestic factors and broader geopolitical influences. As we move forward, monitoring these trends will be crucial for understanding the shifts in consumer behavior and investment strategies within the global gold market.
