Chinese Gold ETFs Rebound as Net Longs Rise, But Wholesale Demand Remains Tepid

Chinese gold ETFs saw significant inflows in July, with net inflows of $744 million and total assets under management (AUM) increasing by 3% to RMB250 billion ($37 billion), according to Ray Jia, research head for China at the World Gold Council.

The WGC's China gold market update notes that both the London Bullion Market Association (LBMA) and Shanghai gold prices remained virtually unchanged in July. However, a weaker US dollar and improved investor positioning supported gold prices, offsetting pressure from rising yields.

In early August, gold prices rose as softer US labor market data and cooling inflation delayed expectations of rate hikes from the Federal Reserve. The Renminbi (RMB) gold price rallied above its 60-day moving average for the first time since mid-March.

Despite wholesale demand remaining tepid in July due to jewelry sector weakness, Chinese net longs rose by 24 tonnes to 117 tonnes at the Shanghai Futures Exchange (SHFE). The People's Bank of China continued to accumulate gold reserves, adding 20 tonnes in July and bringing official holdings to 2,366 tonnes or 8% of total foreign exchange reserves.

Chinese imports also rose in June with net gold imports totaling 152 tonnes, the highest monthly level since March 2024. Looking ahead, Jia notes that if gold prices continue to make gains, Chinese investment demand may follow, but could be diverted by a rebounding domestic equity market.