China’s position as the world’s largest gold market took a notable hit in Q2 2024 as demand for gold jewellery plummeted 35% year-on-year, according to figures by the World Gold Council. The sharp decline was driven by the extraordinary increase in global gold prices clubbed with low consumer sentiments and challenging economic conditions in the mainland. The last quarter, however, might bring some relief for the sector “as typically demand for gold jewellery peaks during this period in China,” Roland Wang, China Regional CEO of the World Gold Council, Beijing, tells Shilpa Dhamija.
In Q1 2024, the demand for gold jewellery in China was 184 tonnes, about 6% less than the same period last year. In Q2, the demand dropped further to 86 tonnes, noting a 35% decline year-on-year. This was China’s weakest demand in Q2 since 2009 because growth in both GDP and disposable income slowed throughout the quarter. Sales during the five-day Labour Day holiday in May, which is usually a time of high purchasing, were dismal as a result. In the first half of 2024, the categories that continued to find demand in China were 24K hard pure products and heritage gold jewellery, according to a report by the World Gold Council
Gold as an Investment in China
In late September, China’s central bank announced one of the most aggressive stimulus post pandemic to resuscitate the contracting economy in the country. The plan included one trillion-yuan liquidity infusion and other measures – such as interest rate reductions to help the severely hit real estate. Soon after the stimulus was announced, Chinese stocks rallied near 2-year highs but were unable to maintain the positive momentum, taking a deep dive days after.
According to Wang, there is still a healthy demand for gold investment products, “but recent rallies in equities and the upbeat sentiment among retail investors towards risk assets may insert some pressure (on gold),” he warns adding that potential future stimuli will help shore up consumer confidence and economic growth that could benefit gold demand as a whole.
Can China maintain its historic dominance in the gold market?
Wang observes that China has now entered an era of ‘high-quality’ growth instead of ‘high-speed’ growth in the gold jewellery market. “This means that consumers now demand more delicately designed jewellery products, and the industry is constantly evolving and innovating to meet higher criteria standards,” he explains.
Additionally, Wang believes that China has a long way to go before it can realise its full potential as a gold and gold jewellery market. “While China’s gold demand in total ranks the first in the world, we must see that the gold consumption per capita (jewellery + bar + coin + technology demand / population) is far behind other developed markets,” Wang reasons, adding that as China’s economy continues to evolve and GDP per capita rises, “the upside potential in China’s gold demand is huge.”
While demand for gold jewellery may be witnessing an evolution in the buying habits of the Chinese consumers, the precious metal will continue to be viewed as an investment asset in the country, “to store value and hedge against any potential risks, especially considering that China’s gold ETF market is still young and small, now growing rapidly,” Wang concludes.