Chinese Gold Demand Remains Resilient Despite Rangebound Prices

Chinese physical gold investment demand remained robust in the second quarter of this year, despite gold trading sideways after its price correction earlier on. The data from Metals Focus shows that Chinese retail gold investment fell by 48 percent quarter-on-quarter in Q2 and 7 percent year-on-year to 107 tonnes. However, when adjusted for the 29 percent year-over-year increase in local gold prices, Chinese retail gold investment demand set a second-quarter record.

The strong demand from Chinese investors is not new; they were key drivers of last year's gold bull market and continue to provide support even after the price correction. According to Metals Focus, investment gold buying was primarily concentrated in April and the first weeks of May, with volumes remaining healthy on an annual basis.

The data also shows that demand slipped in the latter half of May and into June as a range-bound gold price weakened sentiment. Investors pivoted to riskier domestic AI-related equities, but Chinese ETFs added 29 tonnes of metal in H1, the second-strongest start to a year on record.

Metals Focus analysts expect Chinese gold demand growth to continue at a moderately slower pace for the rest of this year. They forecast a 20 percent year-on-year increase to around 500 tonnes, driven by factors such as gold's growing appeal as a store of value and safe-haven asset, and the ongoing shift from quasi-investment jewelry to gold bars.