What China’s reopening could mean for the gold market

CHINA has long been one of the major buyers of physical gold. Since overtaking India as the world’s largest gold consumer in 2013, China contributed an average of 31 per cent to global annual jewellery demand and 24 per cent to global annual bar and coin demand, between 2013 and 2019.

However, as the Chinese economy felt the impact of its zero-Covid policy and strict Covid lockdowns, the country’s contribution to jewellery and bar and coin demand fell to 29 per cent and 21 per cent, respectively. China abruptly ended its zero-Covid policy in early December 2022 and began reopening its economy. What could this mean for the gold market? And has this reopening provided an uplift in Chinese gold demand?

While it has been only just over four months since China scrapped its zero-Covid policy, the latest gold trends in the country appear encouraging. To assess the strength of Chinese gold demand, examine physical gold withdrawals from the Shanghai Gold Exchange (SGE)‘s vaults. Withdrawals from SGE vaults are a key measure for gauging Chinese wholesale gold demand, since withdrawals can only be initiated by members of the exchange – which include large buyers of physical gold such as financial institutions, gold dealers and jewellery manufacturers.