China's Gold Market Remains Steady Amid Volatile Prices

China's gold market remains steady despite gold's sideways price performance in July. The country is the world's biggest gold market, and its demand has been bifurcated between investors and jewelry makers.

The price of gold in yuan remained virtually unchanged in July, but a weaker dollar and improved investor positioning supported the yellow metal. Rising yields continued to create headwinds for gold prices, however.

According to the World Gold Council's gold return attribution model, wholesale demand was 'tepid' in July, but this is largely seasonal. The jewelry sector typically experiences lower demand during Q2 and early Q3.

Withdrawals from the Shanghai Gold Exchange (SGE) fell by 8 percent in July, dipping to 80 tonnes. This decline reflects a softer jewelry market and higher gold prices. Compared to last year, SGE withdrawals are down 15 percent.

In contrast, ETF flows indicated a modest resurgence in investment demand in July. Five tonnes of gold flowed into Chinese gold-backed funds, pushing ETF assets under management (AUM) up 3 percent to ¥250 billion ($37 billion).