World gold prices enter the second half of 2026 with many fluctuations after closing the first 6 months of the year in red. However, according to the latest report of the World Gold Council (WGC), China still maintains an upward trend of gold accumulation, while physical gold demand begins to improve as prices adjust.
According to the WGC, gold prices in June were under great pressure after tough signals from US Federal Reserve (Fed) Chairman Kevin Warsh caused real bond yields and the USD to increase sharply. The opportunity cost of holding gold therefore increased, causing investment capital in gold ETFs to decrease significantly.
In June, the LBMA PM standard gold price and the Shanghai standard gold price both decreased by about 11%, wiping out previous gains. In general, in the first 6 months of the year, gold prices in USD decreased by 8%, while gold prices converted to yuan decreased by 10%, due to the yuan appreciating against the USD.
Declining price movements led to a strong wave of capital withdrawal from gold ETF funds in China. WGC said that gold ETF funds recorded a net withdrawal of about 15 billion yuan (equivalent to 2.2 billion USD) in June - the largest ever recorded level.
After this capital withdrawal, the total managed assets of gold ETF funds decreased by 16%, to 243 billion yuan (about 36 billion USD), while gold holdings decreased by 17 tons, to 277 tons.
However, overall for the first half of the year, gold ETF funds in China still attracted a net capital flow of about 40 billion yuan (5.6 billion USD), equivalent to an investment demand of about 29 tons of gold, becoming the second best first half of the year in history.
This shows that although June recorded the strongest wave of capital withdrawal ever, cash flow accumulated in the first months of the year still helped China's gold ETF demand maintain at a high level throughout the first half of the year.
According to the WGC, geopolitical instability, global economic outlook and the People's Bank of China (PBoC)'s continuous gold purchases are still factors supporting investor sentiment.
Not only investment capital flows, physical gold demand in China also shows signs of improvement. The amount of gold withdrawn from the Shanghai Gold Exchange (SGE) in June reached 87 tons, up 36% compared to the previous month. According to WGC, the increase mainly came from inventory replenishment activities of businesses as gold prices fell, along with bottom-fishing buying pressure from individual investors.
However, in general, in the first 6 months of the year, the amount of gold withdrawn from SGE only reached 598 tons, down 12% compared to the same period last year and 27% lower than the 10-year average. The main reason is still the continued weakening demand for jewelry consumption, causing manufacturing and retail businesses to maintain a cautious import strategy.
A noteworthy bright spot is that the gold buying activity of the People's Bank of China is still continuously taking place despite strong gold price fluctuations.
In June, PBoC bought an additional 15 tons of gold, the largest purchase since October 2023, raising total gold reserves to 2,346 tons, equivalent to about 8% of total national foreign exchange reserves.
This is also the 20th consecutive month China has increased its gold reserves. In the first half of 2026 alone, PBoC bought an additional 40 tons, raising the total amount of gold purchased in the last 20 months to 82 tons.
This continuous gold buying streak is currently the longest since China announced its periodic gold reserve data.
According to the WGC, China's continuous addition of gold to foreign exchange reserves despite price fluctuations shows that gold is still considered a strategic asset in the context of geopolitical risks, financial market volatility and changes in global trade still existing.
According to the WGC, in the short term, gold investment demand in China will continue to depend on the developments of gold prices and the domestic stock market. Although jewelry consumption is likely to still be under pressure due to seasonal factors, more stable gold prices may support physical gold demand recovery in the coming months.
