(Kitco News) – China’s gold market saw liquidations in physical stocks and ETFs and declining futures volumes as investors booked bullion profits to rotate into surging stocks, but a rebound in jewelry demand and an uptick in imports combined with the ongoing price rally bode well for investment demand, according to Ray Jia, Research Head, China at the World Gold Council (WGC).
Jia noted that gold recorded another month of solid price gains in August. “This is mainly supported by higher inflation expectations, intensifying expectations of a Fed cut and continued dollar weakness,” he said. “Meanwhile, sustained geopolitical and trade risks also contributed to gold’s gains in the month.”
The high prices continued to weigh on wholesale demand, however, which saw a monthly decline of 9 tonnes to 85 tonnes last month. “This represents a 17t y/y decline, the weakest August since 2010 – the unseen gold price level has kept tonnage demand low so far in 2025 compared to previous years,” he said.
Jia noted that the monthly decline was also against the seasonal trend, as demand usually picks up towards the end of Q3. “Conversations with industry participants indicated that the August wholesale gold demand weakness mainly came from subdued bar and coins sales, as investors directed their attention to rallying equities,” he said. “Meanwhile, the lack of a clear trend in the gold price in most of August also led to investors waiting on the sidelines.”
“The cooling investment momentum overshadowed improving jewellers’ replenishment activities amid the Chinese Valentine’s Day and the price stability during most of August,” he added.
Chinese investors also continued to sell gold ETFs, taking profits on the metal to rotate back into the white-hot equity markets.
“Chinese gold ETFs witnessed another month of outflows, shedding RMB6bn (US$834mn) in August,” Jia wrote. “The rising gold price was insufficient to offset the outflow, leading to a 2% m/m decline in Chinese gold ETFs’ total assets under management (AUM), which now stands at RMB148bn (US$21bn). Meanwhile, holdings fell 7.7t to 189t.”
“Similar to factors denting bullion sales as noted above, the strong equity performance - the CSI300 Stock Index jumped 10% in August, the strongest month since September 2024 – and the range-bound gold price movements during most of August also weighed on gold ETF demand,” he added.
Gold futures trading volumes at the Shanghai Futures Exchange (SHFE) also declined in August, falling 26% month-over-month to 231 tonnes per day, but still holding above the five-year average of 216 tonnes. “Surging equity market volumes (Chart 4) and a low gold price volatility also dimmed future traders’ interest,” Jia said.
High prices did not dissuade the People’s Bank of China (PBoC) from adding to its streak of sovereign bullion purchases last month.
“The PBoC reported its tenth consecutive monthly gold purchase, adding 1.9t to its total reserves in August,” Jia noted. “Now gold accounts for 7% of China’s total foreign exchange reserves, standing at 2,302t.”
China’s official gold purchases now total 22.7 tonnes year-to-date.
And imports also rebounded from July – the most recent period for which data are available.
“China’s gold imports reached 89t in July, based on the latest data from China Customs, a 50t rise m/m and 53t higher y/y,” he said. “We believe importers’ anticipation of rising wholesale gold demand towards the end of Q3 and positive local gold price premiums in the month encouraged imports.”
Looking ahead, Jia said that despite the recent slowdown, the WGC expects gold investment demand to rebound amid the renewed gold price rally.
“Jewellery retailers may step up their efforts in replenishment for the National Day Holiday in early October,” he added. “[V]arious jewellery fairs in September also tend to support wholesale demand.”
