Why are Gold Investments Surging in China in 2024?

solitaire international magazine

Even amid economic uncertainties, China’s gold allure has never been stronger. In 2024, amidst soaring global prices, the nation’s appetite for gold surged, defying trends and expectations.

Gold consumption in China increased by nearly 6% reaching about 308.9 tonnes in the first three months of 2024 as compared to the same period last year, despite global price surpassing $2400 an ounce, according to the China Gold Association.

Consumer demand remained strong despite the sellers in China charging a premium of about US$40 per ounce, over and above the prevailing global high price of gold.

The rising demand for gold, however, did not benefit sales of jewellery as much as it drove sales of gold bars and coins. The consumption of gold jewellery in China was about 183 tonnes, declining about 3% compared to the same period last year. Whereas the consumption of gold bars and coins saw a notable increase of 26.77% year-on-year, reaching 106 tonnes.

The wholesale demand for gold, in particular, saw a big hike in China. Gold withdrawals from Shanghai Gold Exchange reached 522 tonnes in Q1, highest since the same period in 2019. The high withdrawal of gold is attributed to retailers replenishing stock ahead of the Chinese New Year which was celebrated in mid-February this year, healthy consumption in early 2024, and elevated investment demand throughout the first three months.

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Dragon-themed jewellery, by Chow Tai Fook

Interest in gold as an investment is likely to continue in the remainder of 2024 as it has shown to give better returns than other assets in China. A study by the World Gold Council states that March boosted the RMB gold price’s Q1 return to 10%. Various other factors like uncertainties in the local property sector, apprehensions rising from overseas geo-political tensions and concerns with the stability of the local currency are also attracting interest in gold as a safe haven investment for the Chinese.

Demand for gold jewellery is unlikely to see a hike in the next quarter as it is traditionally an off-season for buying jewellery in China. The ever increasing prices of the precious metal is also likely to subdue the demand.

Chow Tai Fook, greater China region’s leading jewellery retailer, recorded a growth of 12.4% in retail sales value, during the first three months of 2024. Its global franchised retail stores enjoyed a growth of 18.3% in retail sales value. Same store sales in Hong Kong and Macau grew by 4.5%. During the Lunar New Year period, Chow Tai Fook’s dragon-themed products, including a new design of HUÁ Collection did well. The Dragon’s auspicious meaning in Chinese culture, zodiac-themed gold jewellery and ornaments gained overwhelming response, according to the brand. While the average selling price of the Lunar New Year product category during this period was HK$5,700 in the mainland, the average selling point in Hong Kong was much higher at HK$7,500.

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Chow Tai Fook’s Lunar New Year-themed jewellery 2024

Although younger consumers investing in gold is rising, the majority of gold purchases made in China are by the middle aged and elderly demography. Interestingly, this demography is increasingly using e-commerce channels to buy gold.

Currently in China, gold constitutes 4.6% of total foreign exchange reserves. In Q1, the People’s Bank of China’s gold reserves increased by 27 tonnes.

As for imports, China imported 160 tonnes of gold in January on a net basis, which dropped to 79 tonnes in February.

A report in the Chinese media notes that the country has also slightly increased its gold production to meet the increasing demand fuelled by locals looking for safer ways to invest. China produced 85.959 tonnes of gold, up 1.16%, in the first three months of 2024.

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