Rising gold prices have dampened domestic demand for the precious metal, indicating that its high cost is hurting sales of non-essential items such as gold jewelry.
On July 28, the China Gold Association reported that China's gold consumption for the first half of the year totaled 523.753 tons, marking a 5.61% year-over-year decline. Gold jewelry consumption fell by 26.68% compared to the same period last year, while consumption of gold bars and coins surged by 46.02%. According to media estimates, this data implies that second-quarter gold jewelry purchases plummeted by 52%.
The China Gold Association noted that the persistent rise in gold prices, which have continuously set new historical highs, has led to a stark divergence in sales trends between gold jewelry and gold bars and coins. The higher-premium gold jewelry saw significant declines in consumption, whereas the lower-premium gold bars and coins experienced substantial increases.
"High and volatile gold prices have increased operational risks for gold processing and sales enterprises, leading wholesale and retail businesses to reduce their inventory purchases, and significantly lowering the processing volume for jewelry manufacturers," the association stated.
In the first quarter of this year, China's gold consumption had grown by 5.94% year-over-year. However, after an 18-month gold-buying spree, the central bank paused its gold acquisitions in May and June. As of the end of June, China's gold reserves stood at 2,264.33 tons.
Additionally, domestic gold retailers like Chow Tai Fook reported significant declines in sales for the second quarter, and China's gold import volume also decreased last month.
Despite these declines, global gold prices continue to rise due to several factors, including the anticipated interest rate cuts by the Federal Reserve, sluggish global economic recovery, high inflation, and increased demand for safe-haven assets driven by geopolitical uncertainties.
As of now, spot gold prices are at $2,392.09 per ounce, up 0.21%.
The closing price for Au9999 gold on the Shanghai Gold Exchange today was 558.90 yuan per gram, compared to the end-of-June closing price of 549.88 yuan per gram. The weighted average price for the first half of the year was 514.12 yuan per gram.
