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Gold’s meteoric rise in 2024 has drawn global attention, but cracks are emerging in its foundation. While geopolitical tensions and central bank purchases have provided tailwinds, weakening demand in key Asian markets suggests that the rally may be on shaky ground.
Physical Gold trades slightly different to Gold benchmark prices, at times of high demand the Gold trades at a premium, whereas weak demand sees bullion dealers offer discounts below international Gold prices
India and China—the world’s two largest Gold consumers are showing persistent signs of discount pricing, indicating that gold may be too expensive for retail buyers
Gold is currently trading $325 above its 200-day moving average, a significant deviation that highlights its strong momentum. Analysts note that such a large spread has rarely occurred since the 1970s, with previous instances in 1980, 2011, and 2020 coinciding with explosive rallies. Historically, these extreme gaps have often preceded multi-year bear markets, as seen after each of those peaks
While the price remains well above its long-term trend, investors are watching whether this momentum sustains or follows past patterns, where sharp gains led to subsequent corrections. The extent of this spread suggests heightened volatility in gold’s future trajectory. The pace of the recent Gold price rally could be a significant factor in Asian Gold demand being weaker
Gold has been trading at a discount in China for the past two weeks and in India since early January. A discount in local markets typically means that the demand is insufficient to absorb supply at current global benchmark prices. This is a crucial indicator that consumers are reluctant to buy at these elevated levels.
a stark reflection of declining demand. This slump comes as Indian consumers face record-high gold prices, which have significantly reduced affordability. Additionally, high import duties and government policies aimed at curbing gold imports have further pressured demand, making it less attractive for retailers to stockpile gold.
the lowest level since April 2022. The sharp decline suggests a combination of factors at play, including reduced consumer demand due to elevated gold prices and potential capital control measures. Historically, China’s gold imports have been a reliable indicator of domestic appetite, and such a significant drop raises concerns that price resistance among Chinese buyers is increasing.
While India saw a 2% decline over the same period. The decline in China’s jewelry demand is particularly concerning, as it is the largest consumer of gold jewelry globally. Economic uncertainties and shifting consumer preferences—particularly among younger generations favoring alternative investments—may be contributing to this decline. Meanwhile, India’s 2% drop may seem modest, but given the cultural importance of gold in weddings and festivals, even a slight reduction points to growing price sensitivity among buyers.
Due to high prices limiting consumer purchases. Even if the total value of gold purchases remains stable, the volume is likely to decline, meaning fewer ounces of gold are being bought for the same expenditure. This trend suggests that price elasticity is playing a significant role, with consumers opting to delay purchases or buy smaller quantities in response to rising prices.
Gold demand is weakening in key markets, with India’s February gold imports set to hit a 20-year low and China’s January imports via Hong Kong down 44% month-on-month. Jewelry demand in China declined 24% year-on-year, while India’s fell 2%. High prices are expected to keep India’s Q1 2025 demand below the 139 tonnes recorded in Q1 2024.
India’s gold jewellery demand slowed in Q4 2024, down 5% year-on-year, following a strong Q3 boosted by the import duty cut. Full-year demand fell 2% to 563t, despite record gold prices, reflecting resilience in demand. Consumers front-loaded purchases in late Q3, offsetting price hikes.
Annual demand reached INR 3.6tn, with 70% of sales in H2 2024. Q4 demand peaked during Diwali and the wedding season, but remained weak due to high, volatile prices. By mid-December, demand slowed further as an inauspicious Hindu calendar period discouraged purchases.
Domestic demand influences pricing; in India, wedding and festival seasons drive up premiums, while in China, demand surges can lead to higher Shanghai Gold Exchange premiums over spot prices.
China has historically traded at a premium of $40-$60 per ounce over international prices, reflecting strong demand. However, in recent weeks, this premium has collapsed into discount territory, signaling a shift in buyer sentiment.
India, meanwhile, has been in a persistent discount since early January, with prices often $10-$15 below global benchmarks. This reflects continued weakness in demand and high import duties discouraging purchases.
A prolonged period of discount pricing in both markets suggests that retail buyers are balking at current price levels, reducing market liquidity and potentially setting the stage for a correction in global gold prices.
Discounts in Asia clearly signal buyers are waiting for lower prices. Should a deep dip in global Gold prices materalise, strong Asian buying should help to tighten the physical Gold market and place a floor under Gold prices
What can the premiums in the Chinese and Indian market show us about current Gold demand in the world’s largest two markets?
The discount in India’s local Gold prices has meant some Gold that was stored at a customs-free zone in India was sent to the US given how US premiums rose in response to concerns trade tariffs would impact the flow of physical Gold into the US
It made little economic sense to sell Gold into India at a discount when the US was offering close to 1% premium over international Gold benchmark spot prices
The decline in February’s Gold imports was unexpected for the jewellery trade as India is still in the wedding season which usually is supportive of Gold jewellery demand
In January 2025, both China and India remained active buyers of gold, reinforcing their central banks’ commitment to increasing reserves. The People’s Bank of China acquired 5 tonnes of gold, bringing the precious metal’s share to 6% of its total foreign reserves although Auronum presented evidence that China has more Gold that it declares
Analysts suggest this is still relatively low for China to challenge the US dollar as a global reserve currency. Meanwhile, the Reserve Bank of India added 3 tonnes to its holdings, continuing its trend of steady accumulation. These purchases highlight the ongoing demand for gold among central banks, as they seek diversification and financial security.
Chinese gold demand fell to 479t in 2024, 26% below the 10-year average and 10% lower than 2020. Declining income growth, weak consumer confidence, and surging prices hurt jewellery sales, leading to store closures. Golden Week sales in October were poor, but Q4 demand rose 4% quarter-on-quarter due to restocking ahead of New Year and Spring Festival.
Demand has shifted to lighter-weight items. To protect margins, retailers are promoting high-value designs and incorporating gems, enamel, and feathers into gold jewelry to attract younger buyers.
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