According to the World Gold Council (WGC), the Chinese gold market operates strongly when prices and investment demand increases, while importing and gold jewelry demand decrease.
The Chinese gold market has shown significant strength in March and the first quarter, with the price of domestic gold reaching a record high and capital flows into the Gold ETF, along with the central bank to continue to buy. However, the increase in gold price continues to reduce the need for imports and gold jewelry, according to Ray Jia - Head of WGC's Chinese Research Division.
Jia said gold price continued to increase sharply in March, reaching a record high in China and internationally. "ShauPm in the yuan has had the strongest month in a year, while the gold price of USD gold has increased the most since July 2020.
The situation of geopolitical tensions and US President Donald Trump's trade policies has increased the attractiveness of gold as a safe shelter. The weak dollar and the large gold capital flows have pushed the price of gold up, "he said.
The outstanding performance of gold in March contributed to a strong quarter, with gold price in yuan and USD increased by 19%.
"The yuan gold price has recorded the strongest quarter since 2002 when SGE was established, while the gold price in USD also had the best quarter since 1975," Jia wrote.
The main factors in the first quarter include increasing safety demand due to political risks and global trade policies, the weakness of the dollar due to concerns about the US economic growth and the interest rate policy of the US Federal Reserve (Fed), along with strong capital flows into global gold ETFs.
Although the wholesale demand is reduced in the first quarter, the demand in March has recovered. "The amount of gold withdrew from SGE reached 120 tons in March, an increase of 30 tons compared to the previous month but a little lower than last year. The monthly recovery was mainly stored by the golds and banks after the Lunar New Year holiday, a seasonal trend" - Jia said.
Gold ETF capital flows into China remained in March, reaching 5.6 billion yuan (equivalent to 772 million USD). By the end of the month, the total management assets (AUM) of golden ETFs in China reached a record high of 101 billion yuan (US $ 14 billion), with a total gold holding of 138 tons.
In March, China continued to buy an additional 2.8 tons of gold, bringing China's official gold reserve to 2,292 tons, accounting for 6.5% of the country's total reserve.
However, high gold price has negatively impacted gold imports. "Gold imports into China almost stopped in January, reaching only 17 tons, the lowest level since February 2021. Although February import has increased to 76 tons, it is still lower than the monthly average of 2024 tons," Jia said.
Looking forward, Jia said WGC expects the demand for gold investment will continue to be strong in the near future, when the trade tensions between the US and China put pressure on growth and assets.
Chinese insurance companies recently joined the gold market, with four companies becoming a member of SGE in March, it is expected to maintain long -term gold investment demand in China.
