This October, China is seeing a spectacular uptick in gold demand. This demand goes against all historical precedence, with demand typically slowing this time of year. The country has since witnessed an unprecedented growth in such investment and retail appetite for gold. This growth came after a drop in both industries in July and August.
In fact, first half year Chinese physical gold demand was up an astonishing 44 percent year-on-year. Unsurprisingly, investors contributed to this boom with their unprecedented engagement. Just in Q2 they bought over 115 tonnes of gold bars and coins. The early stages of the current gold bull market have seen Chinese demand playing a critical role in driving prices upward.
So, in October, China imported 93 tonnes of gold. This was a 5-tonne increase over September and an increase of 36 tonnes over October 2022’s imports. This robust demand signals strong confidence among Chinese investors in the value of gold as a safe haven asset amid economic uncertainties.
Chinese gold ETFs saw big inflows too, with ¥32 billion—the most since April. These inflows combined amounted to an impressive ~33 tonnes of gold. This increase marks a trend of increasing interest of Chinese investors in this type of investment vehicle.
Over the past two months — July and August — investment demand started to cool. In September, the market rebounded with investors coming back to buying with a vengeance. October’s wholesale gold demand cemented this, rising once again despite the month’s historical propensity for less demand.
The Shanghai gold price spiked by 3.3 percent in the first two weeks of November. This increase is indicative of the market’s persistent resilience. As for restocking, retailers are playing it pretty close to the vest. This hesitation is the result of the high volatility in gold prices experienced earlier this month, according to the World Gold Council.
“Retailers remained cautious in restocking amid the amplified gold price volatility earlier in the month.” – World Gold Council
During the month of September, gold and coin sales were booming in China. This trend underscores the intense demand within this vital market. Economics and cultural importance are cited by analysts as contributing factors to this persistent demand. They argue that gold is not only an emergency asset, but as a fundamental asset.
October typically would not benefit from the seasonal increase in gold demand due to historical seasonal demand patterns. This year’s performance is a dramatic departure from this pattern over the years. Strong interest from investors and consumers alike is further evidence that we may be seeing a fundamental shift in market dynamics. This further underscores China’s importance in the global gold consumption picture.