Chinese gold market outlook 2025: Stabilising demand

The rallying local gold price has been a double-edged sword to China’s gold consumption this year (Chart 2). While the strong gold price performance, alongside slowing economic growth, has dented affordability for gold jewellery consumers; when combined with declining yields, a volatile equity market and a weaker local currency, it has attracted gold investors. Our data shows that China’s gold jewellery demand totalled 373t during the first three quarters of 2024, the weakest since 2010. Conversely bar and coin investment over the same period (253t) reached its highest level in 11 years. Consumer demand above has remained relatively stable between Q1 and Q3, amounting to 626t, an 8% y/y fall.

And the 30t jump in Chinese gold ETF collective holdings through Q3 has eclipsed any previous record – all of this before an unprecedented 21t demand surge in a single month recorded in October; despite a 5t estimated decline in November, the y-t-d gold ETF demand total is more than 45t.

Technology demand remained stable near its long-term Q1~Q3 average of 53t, characteristic of a sector with low demand volatility, which was likely supported by the AI boom.

Meanwhile, reported purchases from the People’s Bank of China (PBoC) have slowed notably in 2024; the 18-month gold purchasing streak came to an end in May 2024, accumulating 29t during the period.

China’s total gold demand – which includes gold jewellery consumption, bar and coin investment, gold ETF net demand, technology use and reported central bank purchases – reached 741t during the first three quarters, a 19% y/y decline. But thanks to strong investment flows, total demand remained above its five-year average of 718t.

China’s gold market outlook 2025

A simple guide to Chinese gold demand’s macro drivers

As we mentioned in previous reports, gold demand in China is not solely driven by changes in the gold price (Chart 3). For instance, economic growth forms the fundamental driver for both gold jewellery consumption and bar and coin investment. And the number of weddings, which impacts gold jewellery buying, is also vital factor to follow. Meanwhile, changes in yields and the local currency are closely tied to retail investment growth. And relatively shorter-term gold ETF investors are mainly driven by the gold price, hedging demand and media attention. 

Various institutions have produced projections for China’s GDP growth in 2025 (Chart 4): the International Monetary Fund (IMF) sees a 4.5% y/y increase and Bloomberg’s median forecast agrees.¹ 

We believe there might be some upside potential compared to these forecasts. China’s 14th five-year plan (FYP), announced in 2021, aims to meet the standards of high-income countries by 2025. Its vision is to double the total economic size of the country by 2035, which implies an annual average growth rate of just below 5%.² The plan is a key factor behind the decision of policy makers to set the 2024 growth target at “around 5%”³ – and economists expect a similar target to be set for 2025 (Chart 5).⁴ 

To achieve such an ambitious target China is likely to keep ramping up both monetary and fiscal supports such as further rate cuts, higher deficit ratio and more special bond issuance. There is also a possibility that China will roll out more-aggressive-than-expected stimulus surprises in the event that the Trump administration imposes tariff hikes – exports have made up 24% of China’s GDP growth during the first three quarters this year.⁵

The current revival in domestic consumption could continue if accommodative polices remain in place. Supported by special trade-in subsidies, retail sales of home appliances and cars have seen a notable recovery.⁶ The housing market, which has seen rebounds in home sales and prices thanks to various stimuli, may also improve amid further stimuli to lower trading costs and lending rates.⁷

Under the scenario where China steps on the gas to achieve growth targets, further interest rate cuts are likely. Meanwhile, a second Trump term, including renewed trade tariffs may bring shocks to the RMB similar to those seen in 2018 when Trump first initiated a trade war with China, leading to depreciating pressure on the Chinese currency (Chart 6). 

But it is also important to note that while challenging, the new tariff shock may not be as destructive, as China is less dependent on exports to the US now than it was in 2018 (Chart 7).

2025 may see a narrower decline in gold jewellery consumption 

We expect to see continued divergence in gold jewellery consumption and investment demand in 2025. We have laid out a base case scenario on the consensus expectations of key macro variables – some of which now include further slight tweaks. We assume, in the base case scenario of 2025 gold jewellery demand:

• a 4.8% y/y increase in the 2025 GDP
• a 3.6% increase in the RMB gold price – based on Oxford Economics expectations as included in Qaurum^SM
• ~25bps down in 10-year government bond yield⁸ 
• a long-term (10 year) declining rate in marriages, affecting gold jewellery consumption.

We have created other scenarios by adjusting GDP growth and the gold price change, the two most important factors that impact gold jewellery demand in China (Chart 8). 

In summary, our model anticipates continued decline in 2025 gold jewellery demand, likely at around 3% - while most other scenarios also point to y/y falls, a sizable drop in the gold price – holding all else constant – may result in a minor rebound. 

Although there could be continued weakness in 2025, the fall is likely to be much milder compared to 2024’s potential more-than-20% drop – Q4 2024 data is based on our modelled results amid various scenarios of key variables (Chart 9). 

While our annual model explains a good portion of variations in Chinese gold jewellery demand – an R-square of 85% to be exact – structural changes, which are difficult to quantify, should also be closely watched. As noted in our most recent Gold Demand Trends, the oversupply issue in China’s gold jewellery industry has led to consolidation of both retailers and manufacturers. This is reflected in a sharp slowdown in expansion among major gold jewellers (Chart 10). For some, points of sales have started shrinking in 2024 – a trend that is likely to continue according to our conversations with industry participants.

On the bright side, ongoing innovation in gold jewellery designs has been key in attracting young consumers, providing longer-term support for demand. And retailers are increasing their efforts in product premiumization, underpinning demand for high-end jewellery items which are usually heavier and more expensive than others. This is a trend we noted in our previous report: while lighter-weighted products with lower costs have increased in popularity, the market share of high-end products remained stable.

And while China’s gold jewellery market may be near saturation, there has been increasing discussion among the industry around export opportunities, which could open a new growth window. In fact, our conversation with market participants indicate that not only major retailers are going abroad, gold jewellery manufacturers in Shenzhen are also experiencing increasing orders from overseas.

2025 investment demand to stay steady

Bar and coin investment may remain healthy in 2025, although may not reach the rate of growth seen in 2024. We believe increasing currency depreciation pressure and a high likelihood of lower interest rates are likely to provide support. Our model, plugging in base case macro scenarios for Q4 2024 and 2025, produces a ~20% y/y rise in full year 2024 and 8% y/y increase in 2025 (Chart 11).

Similar to gold jewellery consumption, factors not included in our model – which are either difficult to forecast or statistically insignificant due to our sample limitation – may also move the needle for bar and coin investment. For instance, reviving signs of the housing market, evidenced by the recent uptick in home buying volumes and prices, could redirect investor attention as property is another popular value-preserving asset in China.⁹ Further diversion could be forthcoming if equities show attractive gains. But if official gold purchase announcements resume, which have been a key driver of gold investment demand in past years, gold investor sentiment will receive an additional boost.

China’s gold ETF market has expanded rapidly in 2024, thanks to the strong gold price performance as well as investor and media attention. Going forward, we believe the gold price will remain a key factor driving ETF flows – a rising gold price usually attracts inflows and vice versa. Meanwhile, equity market volatility, together with China-related economic and geopolitical uncertainties will also be key gold ETF demand influencers. On the flip side, gold ETFs may lose its allure should continued Chinese economic revivals improve investor risk appetite. And profit-taking remains a potential outflow driver as the local gold price stays at record highs.

We have witnessed a notable rise in the number of multi-asset funds with physical gold inclusion – mainly through local gold ETFs. According to public reports, as of June 2024, 204 active listed public funds in mainland China hold gold ETFs, a sharp rise from end-2023’s 112. We believe gold’s strategic role as a hedge against local currency and equity volatilities should continue to attract intuitions’ attention.

In summary

As 2024 comes to an end, we cast our eyes on the future. In 2025 we expect volatilities in key Chinese gold demand sectors to fall. Potential stability in economic development and possible further stimuli, such as interest rate cuts, should help trim gold jewellery demand weakness, although continued consolidation in the industry is likely to remain a key ongoing challenge.

However, with expected declines in yields and a likely weaker local currency, gold investment demand should be supported. But other factors such as investor sentiment towards assets like property and equities also matter. Lastly, gold purchasing announcements from the central bank, should they resume, will provide an additional tailwind to local investor appetite for gold. As such, we believe China’s gold demand will stabilise in the coming year.

Footnotes

¹For more, see: World Economic Outlook, October 2024: Policy Pivot, Rising Threats

²For more, see: Issue Brief - China's 14th Five-Year Plan | United Nations Development Programme and Xi Focus: Xi says China's economy has hope, potential to maintain long-term stable development - Xinhua | English.news.cn

³For more, see: China unveils 2024 growth targets with focus on high-quality development

⁴For more, see: China reaffirms commitment to achieving 2024 goals - Global Times and China to stick with ‘around 5%’ GDP target in 2025 despite Trump tariff threat: economist | South China Morning Post

⁵For more, see: Trump win and threat of more tariffs raises expectations for more China stimulus

⁶For more, see: China provides subsidies to boost home appliance trade-ins and China doubles subsidies to boost auto trade-ins | govt.chinadaily.com.cn

⁷For more, see: Stimulus measures to be enhanced - Chinadaily.com.cn

⁸Based on Bloomberg Economist Survey forecasts’ (ECFC function) lower-end projection. 

 ⁹For more, see: China's property market shows positive changes as supportive policies take hold