China’s gold market is cooling, multiple metrics show
China’s gold market, which along with central bank demand has been one of the central pillars of the multi-year gold rally, has shown definite signs of cooling in recent weeks.
“Amid heightened market uncertainty, gold ETFs have seen an overall reduction in assets under management, with several funds experiencing significant net outflows,” noted a report from Gelonghui Finance. “As of June 3, 14 gold ETFs recorded combined net outflows exceeding RMB 10 billion [$1.48 billion] over the past month.”
“The previously widely accepted investment view of 'buying on dips amid falling gold prices' has started to face divergence under current volatile market conditions,” they added.
Chinese gold equities listed in Hong Kong also declined sharply in a move characterized as ‘unusual.’
“Hong Kong-listed gold stocks broadly declined, with China National Gold International Resources and Jihai Gold down 3.6%, Zijin Mining falling 3.5%, Shandong Gold and Zhaojin Mining dropping nearly 3%, Zijin Gold International declining 2.4%, and Chifeng Gold, Lingbao Gold, China Silver Group, Zhufeng Gold, and Tongguan Gold also following lower,” the report noted.
China’s physical gold market has also cooled substantially from the white-hot demand seen at the start of the year when international and domestic gold prices were setting new all-time records on a near-daily basis.
The latest numbers from the Shanghai Gold Exchange (SGE) showed that gold withdrawals in May totaled only 63.5 tonnes – the lowest level since February of 2020 during the first wave of the COVID-19 outbreak, and around half of what they were in March of this year.
Industry professionals told Gelonghui Finance that “while short-term gold price volatility may persist, the core rationale supporting gold’s strategic allocation value remains intact over the medium to long term.”
