China’s gold rush: world-leading jewellery surge shows how other investments have lost their shine
- Gold’s rising role as a safe-haven investment in China has made it the world’s top buyer, according to World Gold Council’s latest annual report
- Consumers have grown dismayed by lost wealth in traditional assets such as real estate and stocks, and even China’s central bank has got in on the gold-buying spree
China has overtaken India as the world’s No 1 consumer of gold jewellery, with gold becoming increasingly sought after as a safe-haven investment against the backdrop of a dismal real estate market and volatile stocks that have wiped out considerable wealth.
Gold-jewellery consumption reached 630 tonnes in China last year, according to the World Gold Council’s 2023 Report published on Wednesday, representing an annual increase of 10 per cent.
“Surveys from the People’s Bank of China (PBOC) show that the saving intentions of households hovered around record highs in 2023, and this benefited gold, given its long-held status as a store of value,” the report said.
As asset volatility was heightened by China’s ailing property and stock markets, a weak yuan and an unstable political environment, more Chinese people have turned to gold, viewing it as the best means of preserving their wealth.
Despite a broader global decline, annual investments in gold bars and coins also surged in China by 28 per cent in 2023, year on year, to 280 tonnes, the report said.
“The lack of alternatives, and a hedge against currency volatility, along with continued purchases by the People’s Bank of China”, have been prominent drivers of the resilient demand in China, the report said.
China’s central bank also led the pack as the largest single gold buyer last year, reporting a total rise of 225 tonnes in its gold reserves over the year, which marked its highest annual addition since at least 1977, according to the report.
The new additions, which the report said help hedge against growing asset volatility in times of crisis, pushed the PBOC’s total gold reserves to 2,235 tonnes, though this stockpile represents only 4 per cent of China’s vast international reserves.
However, the global demand among central banks saw a small drop last year, the report added.
Looking ahead, gold-jewellery demand in China may face headwinds in 2024 after a traditional Lunar New Year sales boost in the first quarter, the report pointed out.
Rising gold prices and a potential slowdown in economic growth may limit households’ budgets for gold, and the report noted how this could exert pressure on gold-jewellery demand over the rest of the year.
“Furthermore, 2024 is a less auspicious year for marriages, potentially hurting demand for wedding jewellery,” the report said, adding that consumers are expected to be motivated by “value preservation” in their asset acquisitions.
According to China’s customs figures, imports of gold for non-monetary use – including products such as gold jewellery – rose to 1,447 tonnes last year, breaking the previous record of 1,427 tonnes in 2018.
China’s wealth-preservation society ups appetite for gold with record imports
Last year’s total weight marked a sevenfold increase from 2020, while the US$90 billion value represented an almost ninefold increase over the same period.
Seeing unfinished apartment buildings and houses not selling well despite a significant decline in prices, young people from lower-tier cities and less affluent counties have especially contributed to the gold-buying spree, according to state media.
Despite the rising prices and the extra processing fees when buying bars or jewellery at retail outlets, the annual per capita consumption level of gold jewellery in third-tier cities and below increased from 460.70 yuan (US$64) in 2017 to 617.50 yuan in 2022, with a compound annual growth rate of 6 per cent, state broadcaster CCTV reported.
That was higher than their peers from metropolitan areas, as well as the national average.
