China gold market update: Official buying accelerated in August | Post by Ray Jia | Insights - World Gold Council

AI desk brief

Gold rallied sharply in August, with the LBMA Gold Price PM up 13% in USD and Shanghai benchmark gold up 8.4% in RMB, driven mainly by momentum, firmer ETF/futures positioning and shifting Fed-rate expectations. The move cooled in early September as hawkish Fed comments and strong US labour data revived hike bets, though a weaker dollar provided some support.

Chinese official and investment demand was supportive: gold ETFs added 11t in August to 293t of holdings, with AUM rising to RMB282bn, and inflows continued in early September. SHFE gold futures activity also improved, with average daily volume up 36% m/m to 396t/day and top-20 net longs rising 37t to 154t. The PBoC accelerated reserve buying with a 20.2t addition in August, taking official holdings to 2,387t and extending the buying streak to 22 months.

Physical demand was softer. SGE withdrawals fell 22% m/m and 27% y/y to 62t, reflecting cooling bullion demand and tepid jewellery consumption, while July net imports moderated to 118t from 152t in June. WGC says falling yields and equity-market uncertainty should keep investment demand supported, with seasonal Q4 restocking likely to aid jewellery demand.