According to Business Insider (BI), a report by the World Gold Council (WGC) shows that Chinese consumers increased their gold purchases by up to 30% in 2023.
Among them, the People’s Bank of China (PBOC) bought the most gold, using the precious metal as a substitute for the USD in its strategic reserve. Nikkei Asian Review reported that the PBOC has reduced the value of its US Treasury bond holdings by 10%, equivalent to $230 billion since the start of the Ukraine conflict.
Specifically, the WGC report shows that investors, the general public, and the PBOC bought a total of 280 tons of gold in 2023. The PBOC alone net purchased 225 tons of gold, the second highest level since 1950, behind the net purchase of 1,082 tons in 2022.
In the jewelry market, despite the global stagnation, China’s consumption increased by 10% to 630 tons, indicating immense demand among the people.
“China remains the main driving force behind the market in the past year,” said WGC analyst Louise Street.
It should be noted that global gold demand decreased by 5% in the past year to 4,448 tons, following the surge in 2022. However, for the Chinese, gold demand remains strong, both among the public and the PBOC.
World gold prices (USD/ounce)
According to BI, the obsession with gold in China is one of the main reasons why the gold price exceeded $2,000/ounce last year. The total amount of gold withdrawn from the Shanghai Gold Exchange (SGE) in the past year increased by 7% compared to the same period the previous year, reaching 1,687 tons, reflecting the Chinese people’s interest in holding this precious metal.
Even individuals with limited savings can invest in gold-specific ETFs. BI data shows that the inflow of funds into gold ETFs in China has been stable recently as investors seek safe havens for their assets.
WGC’s analysis shows that Chinese consumers have increased gold purchases as the real estate market, stock market, and other investment channels face difficulties.
The CSI 300 stock index in China fell by 5% in January 2024 and 23% in the past year.
By the end of 2023, international investors had withdrawn 90% of their capital from the Chinese stock market due to concerns about trade conflicts and inflation risks. Many international investors redirected this capital to the Japanese stock market, leading to a strong rise in the Nikkei index.
In the real estate sector, the Evergrande debt crisis continues to impact the overall market since the Beijing government tightened capital controls. The total sales value of new homes by major Chinese real estate companies in December 2023 decreased by 35% compared to the same period the previous year.
“Gold has become a vital asset for the Chinese in the face of market volatility,” said analyst Colin Hamilton of BMO.
Source: BI, Nikkei, Financial Times
