According to World Gold Council research head Ray Jia, gold prices in China faced downward pressure throughout May. The Shanghai Gold Benchmark Price fell 2.7%, a decline exacerbated by a strengthening renminbi. This price instability, coupled with a lack of clear upward momentum, prompted investors to liquidate $1.2 billion in gold ETFs, reducing total assets under management by 5% to 43 billion dollars.
China’s Gold Market Cools as Investors Pivot to Equities
A streak of eight consecutive months of ETF inflows into Chinese gold funds ended in May, as investors shifted capital toward a rallying domestic stock market. While retail and wholesale demand hit multi-year lows, the People’s Bank of China bucked the trend by accelerating its bullion accumulation.
Wholesale demand suffered even more pronounced losses. Withdrawals from the Shanghai Gold Exchange totaled 64 tonnes, marking the weakest May for the market since 2010. Jewellers remained hesitant to restock inventories, citing persistent affordability issues and tax burdens. Meanwhile, the People’s Bank of China utilized the price dip to bolster its reserves, adding 10 tonnes to its holdings in May. This 19th consecutive month of state-led purchasing brings the central bank’s total official hoard to 2,332 tonnes, now representing nearly 9% of the nation’s foreign exchange reserves.
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