Gold demand in China continues to rise, supporting high international gold prices. Chinese spot prices have exceeded international benchmarks since August 2023. Reasons for the high demand from China include economic concerns like the Chinese real estate slump and devaluation of the yuan, as well as global instability resulting from deteriorating Chinese foreign relations and wars abroad.
Chinese demand for gold reach 789 tons in 2022, making up 20% of global demand. Increasing purchases by Chinese individuals are lifting prices. Gold ETF holdings are up 27% since the end of 2022 as investors seek stability.
China’s economy is showing signs of slowdown. Both the manufacturing and property sectors are struggling, and heavy corporate debts are threatening operations. The yuan hit 15-year lows against the US dollar in September 2023, sparking speculation that China has limited gold imports to defend its currency.
Chinese investors distrust the yuan amid uncertainty, buying gold as a “stateless currency” and inquiring about offshore real estate, e.g. Japanese properties. Inquiries from China, Hong Kong and Taiwan to one Japanese real estate agency rose 40% between January and November of 2023.
Ongoing gold inflows and foreign property investment reflect persistent economic unease. But with policy stimulus now improbable, the poor outlook on growth may remain until issues around housing, the yuan, and debt show improvement. For the foreseeable future, Chinese demand for gold looks set to keep international prices elevated.
Source: Nikkei, December 15, 2023