Gold demand in China is anticipated to rise in the coming months as consumers adapt to higher prices, driven by economic uncertainty and concerns over currency weakness. This resurgence in demand from the world’s largest gold consumer could further bolster global gold prices, which recently reached record highs.
A dealer from a leading bullion bank in Singapore noted, “Chinese buyers are adjusting to the higher prices.” After a period of inactivity in July, investment demand has picked up, with discounts narrowing as demand improves.
Gold prices have surged by 22% this year, peaking at $2,531.60 per ounce, marking the strongest performance since 2020. Factors contributing to this rally include expectations of interest rate cuts in the U.S., global geopolitical tensions, and increased investor buying.
Philip Newman, managing director of Metals Focus, expressed cautious optimism for the second half of the year, stating, “We will have to see how the prices behave and how quickly consumers and investors can adjust.”
While the People’s Bank of China (PBOC) paused its gold purchases in May, new quotas issued to Chinese banks in August aim to regulate bullion flows into the country. Seasonal demand is expected to rise, fueled by ongoing economic uncertainty and the appeal of gold as an alternative asset amidst a downturn in the property sector.
UBS strategist Joni Teves highlighted that while rising prices might impact jewelry demand, strong investment interest in gold is likely to persist. The PBOC was the largest single buyer of gold in 2023, with net purchases totaling 7.23 million ounces, according to the World Gold Council.