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(Kitco News) -
China saw slight growth in its gold output and a sharp increase in its gold consumption during the first half of 2023, the China Gold Association (CGA) announced on Tuesday.
According to CGA data, the country produced nearly 178.6 tonnes of gold during the first six months of the year, representing a year-over-year increase of 2.24 percent, while raw gold imports jumped 17.5 percent to total 65 tons.
The increase in gold consumption in China during the period was more dramatic, surging 16.37 percent year-over-year to 554.88 tonnes, the CGA said.
“With the normalization of the economy and the revival of the economy, China's gold consumption shows an overall momentum of rapid recovery,” said the statement from the CGA. They also noted that larger gold companies are actively pursuing mergers and acquisitions, which will further concentrate high-quality gold resources in the country.
Breaking down the headline number, consumption of gold jewelry in China reached 368.26 tonnes, up 14.82 percent from a year earlier, while demand for gold coins and bars increased by 30.12 percent to 146.31 tonnes from January to June.
Meanwhile, gold consumption for industrial and other uses decreased by 7.65 percent from the previous year to 40.31 tonnes, the association said.
The report also showed that investors had reduced their holdings of gold-backed exchange-traded funds (ETFs) by 1.26 tonnes in the first half of 2023, bringing holdings of gold ETFs in the China to 50.16 tonnes.
In 2022, China's gold consumption shrank by 10.63 percent to 1,002 tons for the full year.
The People's Bank of China (PBoC) has also been increasing its gold purchases in 2023. On July 7, Krishan Gopaul, senior analyst for the World Gold Council, said that the China’s central bank bought 21 tonnes of gold in June.
“This is the eighth consecutive month of buying, totaling 165 tonnes,” Gopaul said. “Total gold reserves now amount to 2,113 tonnes.”
Over the last several months, analysts have noted that China's consistent demand for gold is part of a strategy to bring more international credibility to the yuan. At the same time, China's buying is part of a significant de-dollarization theme globally.
"China doesn't want to hold dollars for trade as they have struck a number of trade deals with major commodity suppliers from pulp to oil around the world that are specified to trade and settle in renminbi," said Ralph Aldis, Senior Gold Portfolio Manager at U.S. Global Investors.
Aldis added that he expects that China's new gold buying spree has just started. He noted that China has the fifth-largest gold reserves in the world.
“I think you have to benchmark their eventual holdings against the U.S., which stands at 8,133.46 tonnes," said Aldis, "I think China would need to perhaps double their holdings from its current level to go to the second largest holder to have much more alignment as a reserve currency.”
