China’s gold consumption patterns have shifted significantly since the beginning of the year as overall demand dropped amid the surge in prices to all-time highs.
Gold prices hit historic highs during the January-June period resulting in a divergence in sales of gold jewelry and gold bars and coins. The consumption of gold jewelry in China, which comes with a higher premium, significantly declined during the first half. Meanwhile, demand for gold bars and coins, which have relatively lower premiums, surged, according to the China Gold Association.
Inventories slide amid volatility
National gold consumption in China declined 5.61 percent annually during the first half of 2024 to 523.75 metric tons. Gold jewelry consumption fell 26.68 percent year-on-year to 270.02 tons while purchases of gold bars and coins increased by 46.02 percent to 213.64 tons, the association stated.
High and volatile gold prices have raised operational risks for gold processing companies and retailers, resulting in a reduction in inventory and a significant decline in processing volume for jewelry manufacturing companies.
During the first half of 2024, gold was one of the best-performing assets in China. According to the World Gold Council, gold’s strong performance despite the absence of strong Western flows suggests that, unlike previous periods when gold set record highs, the market is still not saturated and could see another rally.
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Global trends
Notably, total global gold demand increased 4 percent year-on-year to 1,258 tons, marking the strongest Q2 on record. Moreover, healthy over-the-counter (OTC) transactions supported demand, rising 53 percent year-on-year to 329 tons, the World Gold Council’s Q2 2024 Gold Demand Trends report said.
Global gold investment remained resilient, marginally higher at 254 tons. Gold bar and coin investment declined 5 percent to 261 tons in Q2 due to a sharp decline in demand for gold coins. Strong retail investment in Asia balanced lower levels of net demand in Europe and North America, where profit-taking surged in some markets.
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