(Kitco News) – China’s gold market showed significant strength in March and through Q1, with all-time highs in domestic prices and ETF inflows and ongoing central bank buying, but the yellow metal’s rally continues to sap imports and jewelry demand, according to Ray Jia, Research Head, China at the World Gold Council (WGC).
Jia noted that gold’s price rally continued unabated in March, with fresh record highs in China and internationally. “The SHAUPM in RMB saw its strongest month for a year while the March return of the LBMA Gold Price PM in USD reached its highest since July 2020,” he said. “Geopolitical tensions and Trump's unpredictable trade policies increased gold's appeal as a safe-haven asset. A weaker dollar and higher gold ETF investments pushed up prices further.”
Gold’s standout performance in March also contributed to a strong Q1 with gold prices in both RMB and USD gaining 19%. “The RMB gold price recorded its strongest Q1 since 2002 – when the SGE was established – and the USD price posted its best Q1 return since 1975,” Jia wrote.
The key drivers during the first quarter included rising safe-haven demand amid global geopolitical and trade policy risks, USD weakness on concerns around U.S. growth and the Fed’s rate path, and strong inflows into global gold ETFs.
Wholesale demand weakened in Q1, however, despite a rebound in March. “Gold withdrawals from the SGE totalled 120t in March, up 30t m/m but slightly lower y/y,” Jia said. “The m/m rebound came as jewellers and banks restocked after the Chinese New Year holiday slowdown – a seasonal pattern. Continued strength in investment demand for gold may also have provided a boost. We believe a pickup in wholesale gold demand resulted in the improving local gold price premium in March (US$4.3/oz on average vs a US$1.5/oz discount in February).”
He noted that Chinese wholesale gold demand came in at 336 tonnes in Q1, which was 29% below the ten-year average and a 36% decline compared to Q1 2024.
Jia said the previous quarter’s weakness can be mainly attributed to a high base, as January 2024 saw the strongest wholesale demand on record, and the surging gold price pressured jewelry demand.
Sky-high prices did help to boost investment demand, however. “Inflows into Chinese gold ETFs sustained for a second month, totalling RMB5.6bn (US$772mn) in March,” he said. “Continued inflows and the surging gold price pushed the total AUM to another month-end peak of RMB101bn (US$14bn). Collective holdings rose further by 7.7t to 138t, also a record high.”
“The soaring gold price remained a key driver for healthy Chinese gold ETF inflows during March, while global trade uncertainties and concerns around their impact on the local economy provided an additional boost,” he added.
The strong demand in February and March also contributed to a record-setting quarter for Chinese gold ETF inflows. “The first quarter of 2025 saw inflows of RMB16.7bn (US$2.3bn), equivalent to a 23t increase in holdings – both reaching record levels,” Jia said. “The unprecedented gold price surge, shaky confidence in other domestic assets, as well as growth concerns stemming from escalating trade
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