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Signs Of Recovery In Chinese Gold Market

U.S. gold futures
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EDITOR'S NOTE: While the Chinese stock market and overall economy are struggling, Chinese gold demand is increasing. Finbold reports three factors that point to this gold recovery in China. First, “September, a month leading up to important Chinese holidays, saw withdrawals from the Shanghai Gold Exchange increase 27% compared to the previous month.” Next, the “Chinese gold imports showed a strong increase in August, and finally, “local premiums have been going up for three months straight.” These factors all signal that demand for gold in China is on the rise, which should be good for gold prices across the board going forward. 

Demand for gold in China is continuing its rebound after the gold market had been negatively impacted by the fallout of the coronavirus. September, a month leading up to important Chinese holidays, saw withdrawals from the Shanghai Gold Exchange increase 27% compared to the previous month. 

Besides the rise in withdrawals in September, Chinese gold imports showed a strong increase in August. Both are signs that the gold market in China is potentially recovering.

Additionally, local premiums have been going up for three months straight, also signaling high demand for the precious metal, according to schiffgold.com analysts.

Gold’s recovery signs

It’s worth noting, that gold is increasingly popular as an investment, signaled by the fact that Chinese gold ETFs haven’t reported outflows for four months in a row. The ETFs currently hold the second-largest amount of gold ever, FT.com reports citing Morningstar’s data.

This is taking place during volatile times for the Chinese stock market and economic woes.

Pundits point to stagflation as a possible sign that demand for gold might continue to increase. October is normally a strong month for jewelry sales in China because of the National Day Holiday.

Gold production in China, the world’s largest producer, has fallen amid gold mine output disruptions, according to a mining.com news report. This, combined with government policies aimed at bolstering Chinese gold consumption, point to higher demand for gold in the coming months.

As per our previous research, China accounted for 380 metric tons or 11.9% share of the global gold production in 2020 followed by Australia’s production of 320 metric tons, representing 10% of the global share.

china gold demand graph

Photo: Finbold

Gold demand outside of China shows mixed signals

Not only in China has the demand for Gold ETFs increased sharply, but gold ETFs in India also attracted 60 million dollars in September, which is almost 20 times higher than the August inflow of $3.19 million.  Although gold ETF demand in Asia is rising, demand for gold is not going up everywhere.

A group of leading banks, who partnered to launch gold futures, have halted gold futures due to low volume. Additionally, our previous data shows a decline in gold ETFs demand in the United States as the most popular U.S. gold ETFs recorded an average decline of over 7% in 2021.

Originally posted on Finbold.

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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