China, the world’s largest gold market, experienced a notable uptick in gold demand during 2023, even as the price in yuan witnessed a significant increase. Gold recorded a 17% surge in yuan terms, emerging as the second-best-performing asset class in China, with only global stocks outperforming gold in renminbi terms. Despite rising prices, wholesale gold demand increased, as gold withdrawals from the Shanghai Gold Exchange (SGE) totaled 1,687 tons, reflecting a 7% YoY rise.
According to the World Gold Council (WGC), geopolitical risks, substantial central bank purchases, and growing expectations of major central banks reducing rates supported gold’s performance in 2023. The attractive performance of gold, coupled with strong local and global central bank acquisitions, garnered extensive coverage by local media. The gold’s appeal was further boosted by households seeking to preserve value amidst weakening currencies and economic uncertainties.
Innovations by jewelry manufacturers and the expansion of product ranges adapting to evolving consumer preferences contributed to gold’s appeal. Jewelry sales in China reported a 12.2% increase through the first three quarters of 2023, nearly doubling growth in the overall retail sector. Despite economic headwinds, including cautious consumer spending and an uneven economic recovery, Chinese gold demand remained robust, showcasing the metal’s enduring popularity among investors and consumers alike.
Gold demand extended beyond jewelry sales, with Chinese investors displaying keen interest in gold bars and coins. Investment gold demand in the first nine months of 2023 surged by 26% compared to 2022. Chinese gold-backed Exchange-Traded Funds (ETFs) led global inflows, adding 10 tons to their holdings, bringing total assets under management to 29 billion yuan ($4 billion). The significant demand, coupled with a decline in gold imports, led to a notable price premium in China, reaching the highest annual average in history.
Chinese central bank gold buying also played a pivotal role, with the People’s Bank of China officially increasing its gold holdings by 225 tons in 2023, reaching a total of 2,235 tons by the end of December. While this official figure accounts for 4.3% of China’s official foreign exchange reserves, there is persistent speculation that China may hold a more substantial amount of gold “off the books” in a separate entity, contributing to its enduring status as a key player in the global gold market.
