According to the latest updated report on the Chinese gold market by the World Gold Council (WGC), gold prices in London and Shanghai markets remained almost unchanged in July. However, beneath relatively stable price movements, gold investment activities in China are showing positive signs.
Mr. Ray Jia - Director of China Research at WGC - said that the weakening USD and improved investor positions supported gold prices, offsetting pressure from rising bond yields.
In early August, gold prices continued to rise after US labor market data weakened and inflation cooled down. These factors caused expectations that the US Federal Reserve (Fed) would raise interest rates to be pushed back.
Gold prices in yuan also exceeded the 60-day moving average, around 920 yuan/gram, for the first time since mid-March.
Gold ETF funds attract capital back
A noteworthy point in July is the return of capital to gold ETF funds in China.
According to WGC, Chinese gold ETFs recorded a net capital flow of about 744 million USD in July, reversing after significant capital withdrawals in previous months.
Positive cash flow helped the total managed assets of Chinese gold ETF funds increase by 3%, to about 250 billion yuan, equivalent to 37 billion USD. Gold holdings increased by about 5 tons, to 282 tons.
WGC assesses that demand for gold ETFs is supported by geopolitical instability, weakening stock markets and continuous gold buying activities by the People's Bank of China (PBoC). In addition, the increasing participation of institutional investors also contributes to promoting capital flows.
Despite recording capital withdrawals in May and June, from the beginning of the year to the end of July, Chinese gold ETFs still attracted about 45 billion yuan, equivalent to 6.3 billion USD and about 34 tons of gold. This is the second strongest increase ever recorded in the same period of the year.
Notably, the positive trend continued into August. According to WGC, Chinese gold ETFs bought about 8 tons of gold, with capital inflows appearing almost every trading day.
Future gold buying position increases
Contrary to the trend of increasing investment positions, the trading volume of gold futures contracts on the Shanghai Futures Exchange (SHFE) continued to decrease in July.
Average trading volume decreased by 4% compared to the previous month, to about 292 tons/day. WGC believes trading activity cooled down as gold price volatility decreased.
However, the net buying position of the 20 largest gold futures traders on SHFE increased by 24 tons, reaching 117 tons at the end of July. This development reflects an improvement in market sentiment.
Meanwhile, wholesale gold demand is still relatively weak. Gold withdrawals from the Shanghai Gold Exchange (SGE) by banks, gold businesses and refineries decreased by 8% compared to the previous month, to 80 tons.
Compared to the same period last year, the amount of gold withdrawn from SGE decreased by 15%, mainly due to weakening jewelry demand in the context of gold prices maintaining at a high level and consumer confidence not recovering strongly.
Central Bank of China continues to buy gold
PBoC continued to add about 20 tons of gold to reserves in July, raising the total official gold volume to 2,366 tons, accounting for about 8% of total foreign exchange reserves.
According to the WGC, China's central bank's gold buying streak has lasted 21 consecutive months - the longest ever recorded level.
China's gold imports also increased. In June - the most recent data period - net gold imports reached 152 tons, an increase of about 2 tons compared to May and the highest since March 2024.
In the first half of the year, China imported about 764 tons of gold, an increase of 138% compared to the same period.
WGC believes that if gold prices continue to rise, investment demand in China may be supported. However, the recovery of the domestic stock market is also likely to attract part of the capital outflow from gold in the near future.
The article updates market developments, not investment recommendations. Investors need to consider carefully before making a decision.
