Despite the impact of high gold prices, seasonal factors have buoyed a quarter-on-quarter resurgence in gold jewelry demand within the Chinese market from July to September, the World Gold Council said on Wednesday.
The council anticipates a possible rebound in gold jewelry demand throughout the fourth quarter.
Data from the WGC revealed a 19 percent quarterly growth in gold jewelry demand in the Chinese market during the third quarter. However, owing to the combined effects of elevated gold prices and economic conditions, gold jewelry consumption dropped by 34 percent compared to the same period last year, marking a 36 percent dip from the 10-year average level.
In the first nine months, total gold jewelry demand in China amounted to 373 metric tons, reflecting a 23 percent decrease from the corresponding period in the previous year.
During the third quarter, the Chinese gold exchange-traded fund (ETF) market experienced an outflow of approximately 520 million yuan ($73 million), equivalent to 1 metric ton of gold. Yet, over the initial three quarters, the aggregate holdings and assets under management of gold ETFs in the Chinese market surged by 49 percent and 91 percent respectively.
Notwithstanding recent outflows from the Chinese gold ETF market, the cumulative demand has reached a record-breaking 17 billion yuan ($2.3 billion) thus far.
Demand for gold bars and coins decelerated, amounting to 62 tons in the third quarter, marking a 22 percent quarterly decline and a 24 percent annual decrease. Factors contributing to this downturn includes a higher baseline from the same period in the previous year, the appreciation of the Chinese renminbi and domestic assets (particularly towards the end of the third quarter), and the stabilization of domestic gold prices at elevated levels for much of the quarter.
Nevertheless, demand for gold bars and coins remained robust from the beginning of the year to the present, totaling 253 tons and reaching a peak not seen since 2013.
Wang Lixin, the regional CEO of WGC China, noted, “The fourth quarter traditionally witnesses heightened demand for wedding jewelry, with expectations of an upsurge. The forthcoming Spring Festival holiday is also prompting retailers to restock, providing seasonal support for gold jewelry demand in the fourth quarter.”
Furthermore, the recent rollout of a series of favorable economic stimulus policies by the government is anticipated to bolster future gold jewelry consumption. Nonetheless, uncertainties persist regarding the impact of high gold prices and the efficacy of various stimulus measures in boosting consumer confidence. Additionally, ongoing industry consolidation and the reduction in retail outlets may potentially lead to a contraction in upstream physical gold demand, according to Wang.
Regarding gold retail investment demand, Wang said, “Potential further reductions in domestic interest rates could offer some backing for gold investment demand in the fourth quarter. Nevertheless, as economic stimulus measures continue to be implemented, investments in gold bars and coins might face competition from other domestic assets. The trajectory of gold prices will remain a pivotal factor influencing investment demand.”