Key highlights:
- The Shanghai Gold Benchmark PM (SHAUPM) in RMB and the LBMA Gold Price AM in USD were virtually unchanged in June; despite cooling momentum, gold capped H1 with sizable gains in both RMB and USD terms
- Gold withdrawals from the Shanghai Gold Exchange (SGE) totalled 86t in June, a mild rise of 5% compared with a weak May and a sharp fall of 31% y/y, signalling further weaknesses in gold demand. In H1, withdrawals accumulated to 822t, a mild 2t y/y decline and 7% below the ten-year average – bar and coin sales strength partially offset jewellery consumption deceleration
- Gold ETFs in China saw their seventh consecutive monthly inflow in June, pushing their total assets under management (AUM) to RMB51bn (US$7bn), the highest ever. Between January and June, Chinese gold ETFs have attracted RMB17bn (US$2.3bn), the strongest H1 on record
- The People’s Bank of China (PBoC) reported no gold reserve changes two months in a row, leaving its holdings at 2,264t, 4.9% of total reserves. During H1, China announced a 29t net gold purchase, pushing total holdings 1.3% higher.
Looking ahead
Our expectations for gold jewellery consumption and investment demand remain unchanged.
- Overall, while the elevated gold price may continue to assert pressure, record-low consumer confidence and an uncertain outlook for the economy may lead to increasingly cautious spending, especially on discretionary items such as gold jewellery
- Despite a recent slowdown, gold’s strong performance so far in 2024, local asset uncertainty and risks associated with the economic outlook should bode well for bar and coin sales in China.
Gold ended H1 with sizable gains
Gold levelled off in June, ending the month with mild losses (Chart 1). Both the LBMA Gold Price AM in USD and the SHAUPM in RMB declined by 0.7%. In general, pressure brought by a stronger dollar and sliding inflation expectations were partially offset by positive impacts from lower US Treasury yields and improved gold market momentum, as our Gold Return Attribution Model suggests.
Chart 1: Gold moved sideways in June
Monthly changes of SHAUPM and LBMA Gold Price AM*
In H1, gold has delivered notable returns for investors, up by 13% in USD terms and 14% in RMB – aided by the depreciating local currency (Chart 2).
For detailed analysis and outlooks, see: Gold Mid-Year Outlook 2024
Chart 2: Gold has delivered sizable returns in H1
Major asset performance so far in 2024*
Wholesale gold demand remained tepid in June
The industry withdrew 86t of gold from the SGE in June, a 5% m/m rise compared to a weak May but a 31% fall y/y, the lowest since 2020. Gold jewellery consumption stayed weak in June, impacted by record-level local prices, seasonal weakness and tepid consumer confidence. At the same time, anecdotal evidence suggests that bar and coin sales also slowed during the month as investors wait for clarity on the gold price trend. This was also reflected in a lower Shanghai-London gold price premium during the month.
Chart 3: Gold withdrawals remained weak in June
Gold withdrawals from the SGE in 2024 and the 10-year average*
During the first half, gold withdrawals from the SGE totalled 822t, on a par with 2023 but 7% below the ten-year average (Chart 4). H1 has been a tale of two halves for gold jewellery consumption: demand was exceptionally strong in most of Q1, but then hampered by a price surge, seasonality and weak consumer sentiment. Yet investment demand remained relatively strong. Although slowing in late Q2 when the gold price stabilized, bar and coin sales have witnessed robust growth during the majority of H1.
Chart 4: H1 wholesale gold demand matched 2023
Gold withdrawals from the SGE in H1 and the 10-year average*
Gold ETFs kept seeing inflows while futures trading cooled
Chinese gold ETFs saw inflows seven months in a row, attracting RMB3bn (US$429mn, 5.6t) in June. Continued exchange rate and equity market weakness kept investors’ safe-haven demand elevated, spurring further gold ETF inflows in June. Following June’s addition, the total AUM of Chinese gold ETFs rose to RMB51bn (US$7bn) and collective holdings increased to 92t, both setting new records.
China has seen non-stop inflows into local gold ETFs so far in 2024, capturing RMB17bn (US$2.3bn) between January and June, the strongest H1 ever. Meanwhile, holdings have surged by 31t. In a nutshell, volatile equities, a weakening local currency as well as gold’s strong performance supported demand for gold ETFs in China. It is also worth noting that gold ETF demand in China has outpaced all other countries during H1.
Chart 5: Chinese gold ETFs have seen inflows seven months in a row
Chinese gold ETF AUM and holdings
On the flipside, trading volumes of gold futures at the Shanghai Futures Exchange (SHFE) decelerated further in June, averaging 146t per day, a 24% m/m decline. As the price levelled off, tactical investors’ interest in gold faded. Nonetheless, spikes in March and April pushed the H1 average to 182t, 34% above the 2023 mean of 136t.
Chart 6: Trading activities at the SHFE fell further in June
Active gold future contract monthly average volume and the five-year average*
No change reported in Chinese gold reserves during June
The PBoC announced no gold reserve changes in June, leaving its total holdings at 2,264t, unchanged for two consecutive months (Chart 6). Gold’s share in China’s total official reserves remains at 4.9% in June. And during H1 2024, China announced net gold purchases of 29t, a 1.3% rise in holdings.
Chart 7: Gold’s share in China’s reserves saw no change in May
Official gold reserves (tonnage) and their share of total foreign exchange reserves*
Gold imports rebounded slightly in May
Based on the most recent data from China Customs, China imported 89t of gold in May, 12t higher m/m but 35t lower y/y. In general, net imports have remained somewhat stable in recent months, hovering around their 12-month average of 86t. During the first five months of 2024, China imported 490t of gold, a mild 12t fall y/y.
Chart 8: Gold imports stayed stable*
