Gold consumption demand in China shows signs of recovery.
According to a report from the World Gold Council (WGC), China's domestic gold market showed significant improvement in January 2025, with the central bank continuing its gold purchases for the third consecutive month.
Despite a decline in gold imports and negative inflows into gold ETFs, market signals suggest that demand for gold is trending upwards in the near future.
The Chinese central bank's gold reserves have been increasing continuously.
According to a report from the World Gold Council (WGC), the People's Bank of China (PBoC) continued its gold purchases in January 2025, marking the third consecutive month of increased reserves. Specifically, the PBoC purchased an additional 5 tons of gold, bringing China's total official gold reserves to 2,285 tons, accounting for 5.9% of its total foreign exchange reserves.
In 2024, China purchased a total of 44 tons of gold, despite a six-month pause in the middle of the year. The central bank's continued gold purchases are believed to have a positive impact on the sentiment of domestic gold investors, as this is generally seen as an optimistic signal about the value of gold.
Gold imports decreased compared to the previous year.
Although official gold import data for January 2025 has not yet been released, 2024 ended with a decrease in gold imports compared to 2023. According to data from Chinese Customs, China imported 84 tons of gold in December 2024, bringing the total imports for the fourth quarter to 270 tons.
However, compared to the same period in 2023, imports in the fourth quarter of 2024 decreased by 14%, despite an increase of over 160% compared to the third quarter. For the whole year of 2024, China imported 1,225 tons of gold, a decrease of 14% compared to 2023 and 16% lower than the average of 1,460 tons in the five years before the COVID-19 pandemic. This decline reflects a 10% decrease in domestic gold consumption in 2024 compared to 2023.
Signs of recovering demand for gold.
However, the Lunar New Year holiday (late January to early February 2025) has brought positive signals for gold consumption demand. According to Ray Jia, box office revenue during the holiday reached record highs, and spending on food and travel also increased compared to the same period in 2024.
In particular, demand for gold has also surged, with many gold jewelry stores reporting high sales. The rising price of gold has also led consumers to switch to lighter, lower-priced products.
Although wholesale gold demand in January increased by 3% compared to the previous month, it remained significantly lower than the same period last year. Specifically, 125 tonnes of gold were shipped from the SGE (Shanghai Gold Exchange), but wholesale demand was still down 54% compared to January 2024 and 37% lower than the 10-year average. The main reason is that gold jewelry retailers reduced their inventory ahead of the Lunar New Year, fearing high gold prices and weak consumer demand over the past year.
Investing in gold continues to attract interest.
The investment outlook for gold in China is also improving. The sharp rise in gold prices, coupled with the central bank's continuous gold purchases and the volatility of the domestic currency, has attracted the attention of investors.
Ray Jia, Head of Research at WGC, said gold prices have started 2025 strongly, with both the London LBMA (LBMA) and Shanghai gold prices reaching multi-year highs. Specifically, the LBMA gold price in USD has risen 8%, while the Shanghai gold price in RMB has increased 5%.
According to Jia, there are three main factors that contributed to the record gold prices in January:
Increased geopolitical risks: The Trump administration's tariff policies have heightened concerns about global economic instability.
Gold ETFs are inflowing more money: Many investors have turned to gold as a safe haven investment.
Concerns about a return of inflation: Rising inflation makes gold an attractive asset for protecting wealth.
Online searches for gold have surpassed the previous peak in 2013 – a time when gold demand in China reached its highest level in history. Discussions with market participants also suggest that sales of gold bars and ingots will maintain the impressive pace seen in 2024, potentially even leading to shortages in some areas.
Future prospects
The World Gold Council predicts this positive trend may continue in the near future. Although demand for gold jewelry may remain low, the preservation of value will provide some support. Meanwhile, sales of gold bars and ingots are expected to continue to rise, and any correction in gold prices could be seen as a good investment opportunity. In addition, a new policy allowing 10 insurance companies in China to purchase up to 1% of their assets in physical gold (on a pilot basis) will also provide long-term support for domestic gold investment demand.
