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Amid surging global gold prices, China, one of the world’s largest gold consumers, has seen a significant decline in gold consumption in the first three quarters of 2024. This drop in demand has affected several segments of the market, including jewelry, bullion, and industrial applications. Here’s a look at the key trends shaping China’s gold market this year.
Key Data and Facts:
Gold Consumption Decline: China’s gold consumption dropped by 11.2% from January to September 2024, totaling 741.732 tons.
Jewelry Demand Downturn: Jewelry consumption, making up over half of total gold demand, fell sharply by 27.5% year-on-year, reaching 400.038 tons.
Industrial Use Decline: Gold used in industrial applications decreased by 2.8%, totaling 58.973 tons.
Gold Prices Surge: Gold futures on the COMEX reached record highs, driven by economic instability and geopolitical events, such as the Middle East conflict.
Gold Bars and Coins Demand Increases: Safe-haven demand for gold bars and coins rose 27.14% due to attractive premiums, totaling 282.721 tons.
Gold jewelry has traditionally been one of the strongest pillars of China’s gold consumption, representing more than half of the country’s total demand. However, in 2024, this segment took a substantial hit:
Jewelry consumption dropped by 27.5% year-on-year, with only 400.038 tons consumed between January and September.
The rise in gold prices, influenced by economic uncertainty and heightened geopolitical risks, has curbed consumer appetite for high-priced jewelry pieces.
Despite the slump, small gold jewelry pieces saw some growth thanks to the popularity of e-commerce channels like live-streaming platforms. These accessible and affordable options have partly offset the decline in traditional jewelry demand.
Investor anticipation of interest rate cuts and prolonged economic uncertainty.
Increased geopolitical tensions, particularly in the Middle East, further escalating gold prices.
On the Shanghai Futures Exchange, gold contracts jumped by 23.5% to 596.72 yuan per gram as of September 30, reaching a record high of 630.44 yuan per gram in October.
The rising cost of gold has deterred both consumers and businesses from purchasing high-priced jewelry and industrial gold. The China Gold Association highlighted that “in the first three quarters, the price of gold continued to rise, and the consumption of gold jewelry was significantly affected.”
China’s gold consumption for industrial purposes has also been negatively impacted by high prices:
Industrial demand for gold declined by 2.8% year-on-year, reaching 58.973 tons.
High gold costs have made it challenging for industries to maintain previous levels of consumption, impacting sectors that rely on gold for technological and manufacturing processes.
China’s domestic gold production saw a modest decline in 2024:
Domestic raw gold output reached 268.068 tons, down by 1.17% year-on-year, attributed to a lack of new production capacity.
However, gold production from imported materials rose by 15.5%, totaling 111.207 tons.
Combined, total gold production in China reached 379.275 tons, representing an increase of 3.2% over last year. This increase underscores the country’s reliance on imported raw materials to support its gold output amid limited growth in domestic mining capacity.
While consumer consumption slowed, the investment sector witnessed a surge in activity on the Shanghai Gold Exchange:
Trading volumes on the Shanghai Gold Exchange climbed significantly, with bilateral trading volumes reaching 46,500 tons, marking a year-on-year increase of 47.5%.
China’s gold ETF holdings also rose by nearly 49%, totaling 91.39 tons by the end of September, as investors sought protection against economic volatility.
This growth in ETF holdings and trading volumes highlights an important trend: although consumer demand may be price-sensitive, investment demand remains robust, underscoring the continued importance of gold as a safe-haven asset.
The outlook for China’s gold consumption remains uncertain as high prices and global instability continue to shape the market:
Retail gold demand, particularly in price-sensitive countries like China and India, may continue to struggle if prices remain high.
With geopolitical risks persisting and economic recovery still fragile, gold is likely to retain its appeal as a protective asset among investors.
As the world’s second-largest consumer of gold, China’s demand trends will remain a significant factor in the global gold market. The shift from traditional gold jewelry consumption toward investment holdings and trading highlights an adaptation to market conditions, with Chinese consumers increasingly viewing gold as an investment vehicle rather than solely a luxury purchase.
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