BEIJING: China’s gold consumption pattern shifted significantly in the first half of 2024, with overall demand dropping as record-high gold prices deterred jewellery buyers even as purchases of gold bars and coins showed an uptick.

As gold prices touched historic highs during the January to June period, sales of gold jewellery as well as gold bars and coins showed a divergent trend.

The consumption of gold jewellery, which has a higher premium, significantly declined while that of gold bars and coins, which have relatively lower premiums, surged, according to the China Gold Association.

National gold consumption in China dropped 5.61% year-on-year during the first half of 2024 to 523.75 tonnes, with that for gold jewellery falling 26.68% year-on-year to 270.02 tonnes and purchases of gold bars and coins increasing by 46.02% to 213.64 tonnes, the association said.

High and volatile gold prices have increased operational risks for gold processing and sales companies.

This has led to a reduction in inventory by wholesale and retail businesses and a significant decrease in processing volume for jewellery manufacturing companies, the association added.

Gold was one of the best-performing assets through the first half of 2024. The precious metal was up 12% in US dollar terms through the first half of the year.

According to the World Gold Council, gold’s strong performance despite the absence of strong Western flows suggests that, unlike previous periods when gold set record highs, the market is still not saturated and could see another rally.

Zhao Xiangbin, chief strategist at Beijing Gold and Forex Fortune Investment Management, said the trend may continue if gold prices remain elevated.

The sharp increase in gold prices has reshaped consumer behaviour.

While luxury jewellery has become less attractive due to its high premium, he said that the appeal of gold bars and coins as a stable investment has grown.

The soaring gold prices have led to a substantial decline in gold jewellery consumption, leading consumers, wary of the inflated costs, to curtail spending on luxury gold items, he said.

In contrast, demand for gold bars and coins, seen as safer investment assets with lower premiums, has surged as investors sought to hedge against economic uncertainty, he added.

According to the association, the volatility in gold prices has also impacted gold processing and sales companies.

Wholesale and retail enterprises have reduced their inventory purchases, and jewellery processing companies have seen a significant drop in their processing volumes, it said.

 - China Daily