China’s gold market update: Investment boom continues in March

Another month, another record high

Gold’s rally continued in March (Chart 1). The SHAUPM in RMB saw its strongest month for a year while the March return of the LBMA Gold Price PM in USD reached its highest since July 2020. Geopolitical tensions and Trump's unpredictable trade policies increased gold's appeal as a safe-haven asset. A weaker dollar and higher gold ETF investments pushed up prices further.

March ended Q1 on a strong note with both RMB and USD gold prices jumping 19% (Chart 2). The RMB gold price recorded its strongest Q1 since 2002 – when the SGE was established – and the USD price posted its best Q1 return since 1975. Key drivers included:

• The rising safe-haven demand amid global geopolitical and trade policy risks
• A weaker dollar on concerns around US growth and shifting expectations of the Fed’s future cuts
• Strong momentum as global gold ETFs attracted notable inflows.

Wholesale demand weakened in Q1 despite a m/m rebound in March

Gold withdrawals from the SGE totalled 120t in March, up 30t m/m but slightly lower y/y. The m/m rebound came as jewellers and banks restocked after the Chinese New Year holiday slowdown – a seasonal pattern. Continued strength in investment demand for gold may also have provided a boost. We believe a pickup in wholesale gold demand resulted in the improving local gold price premium in March (US$4.3/oz on average vs a US$1.5/oz discount in February). 

Chinese wholesale gold demand totalled 336t in Q1, 29% below the ten-year average and a 36% fall y/y (Chart 3). We believe this weakness can be mainly attributed to:

• A high base – 2024 witnessed the strongest January wholesale demand on record
• A surging gold price – the record-shattering gold price hampered gold jewellery demand, a major factor in SGE gold withdrawals, although it did boost gold investment. 

Chinese investors continue to buy gold ETFs at a robust pace

Inflows into Chinese gold ETFs sustained for a second month, totalling RMB5.6bn (US$772mn) in March. Continued inflows and the surging gold price pushed the total AUM to another month-end peak of RMB101bn (US$14bn). Collective holdings rose further by 7.7t to 138t, also a record high (Chart 4). The soaring gold price remained a key driver for healthy Chinese gold ETF inflows during March, while global trade uncertainties and concerns around their impact on the local economy provided an additional boost. 

Strong demand in February and March led to a record quarter for Chinese gold ETF inflows (Chart 5). The first quarter of 2025 saw inflows of RMB16.7bn (US$2.3bn), equivalent to a 23t increase in holdings – both reaching record levels. The unprecedented gold price surge, shaky confidence in other domestic assets, as well as growth concerns stemming from escalating trade conflicts with the US, all contributed to strong Q1 flows.    

And it is worth noting that record inflows continued into Q2. During the first two weeks of April, Chinese gold ETFs’ collective holdings surged another 29t whilst total AUM rocketed 25% on sustained gold price strength and escalating trade tensions with the US.   

China’s gold reserves rose further in March

The PBoC has announced gold purchases in each of the past five months, and in March, added a further 2.8t (Chart 6). This pushes China’s official gold holdings to 2,292t, or 6.5% of total reserves. During Q1 2025 China reported purchases of 12.8t of gold. 

Over the course of Q1 China’s total reserves rose by 2.3% to US$3.5tn, supported mainly by: 

• A weaker dollar, which pushed up USD denominated assets
• Falling US yields, which lifted bond values 
• Rising gold holdings and a surging gold price, which surged 20% to US$230bn and contributed over 1% to the quarterly increase in total reserves.  

Imports remained tepid at the start of 2025

Gold imports into China virtually came to a halt in January, amounting to just 17t, the lowest monthly value since February 2021 – at which time imports were hampered by COVID restrictions. February imports picked up, rising to 76t. Nonetheless, they remained well below the 2024 monthly average of 102t.

And the weakness is more obvious on a netting basis. Net ordinary imports fell to zero in January, the lowest since early 2021; they rebounded to 49t in February, yet still represented a 38% y/y plunge. We believe fewer working days due to the Chinese New Year’s holiday, weak domestic gold demand and local gold price discounts during most of the period – which discouraged importers – were the main drivers.