(Kitco News) – China’s gold market continues to be a global leader with record-breaking imports, soaring ETF demand, and high price premiums setting the stage for strong performance. However, Ray Jia, China Research Head at the World Gold Council, notes that the surge in prices may dampen jewelry demand and slow down central bank purchases.
Price Performance and Market Trends
In April, gold prices saw an increase, albeit at a slower pace compared to March. Factors such as geopolitical risks and active futures trading contributed to the strength of gold during the month. When compared to other major assets, the yellow metal has performed well year-to-date, drawing continued attention from local investors.
Gold’s local price appreciation was met with rising wholesale demand in China. Investment strength outweighed weaknesses in jewelry demand, with physical gold investments remaining strong.
Local Market Dynamics
China’s domestic price premium rose in April, reflecting increased local demand. However, a closer look reveals that while the price surge drove up investment demand in the first half of the month, a later price pullback cooled momentum.
Chinese gold ETFs witnessed unprecedented demand in April, with record inflows and the strongest month on record. Holdings increased significantly, showcasing investor interest, although demand cooled as gold prices slowed down towards the end of the month.
Central Bank Reserves and Imports
China’s official sector continued to add to its gold reserves in April, albeit at a slower rate compared to previous months. The total gold holdings now represent the highest-ever proportion of the country’s foreign exchange reserves. Meanwhile, Q1 gold imports hit a nine-year high, driven by strong local demand.
Anecdotal evidence suggests that gold jewelry consumption during China’s Labor Day holiday was weak due to high prices, while investment demand also showed signs of slowing. The World Gold Council expects jewelry consumption to remain subdued, but investment demand is likely to stay supported by the need for value preservation and gold’s prominent status in China.
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