The Zhitong Finance App learned that in July, the World Gold Council published an article stating that in July, the price of gold remained stable and the London Midday Gold Price (LBMA) in US dollars remained flat, while the Shanghai Midday Benchmark Gold Price (SHAUPM) in RMB rose slightly by 0.7%. Both rose further in early August. Gold ETFs in the Chinese market achieved a net inflow, boosting total holdings by 5 tons to 282 tons in July. This trend has continued since August, with net inflows recorded almost every trading day.
In July, as gold price volatility declined, gold futures trading volume cooled down, but net long holdings increased. Demand for upstream physical gold remains sluggish, reflecting the continued weakness of the jewellery industry.
In July, the People's Bank of China increased its gold holdings by 20 tons, making it the largest monthly purchase since the end of 2023. This is also the 21st month in a row that it has increased its gold holdings.
Gold prices were stable in July
The World Gold Council's short-term gold price performance attribution model shows that the weakening of the US dollar and improved investor holdings provided support for gold, offsetting the pressure brought about by rising US bond yields; in early August, weakening US labor market data combined with the cooling of inflation jointly delayed the market's expectations for when the Fed would raise interest rates, driving the price of gold higher.
In early August, the price of RMB gold rose above the 60-day moving average of about 920 yuan/gram for the first time.
Monthly return on gold prices in USD and RMB
Gold ETFs in the Chinese market turned into net inflows
In July, gold ETFs in the Chinese market recorded a net inflow of 5 billion yuan, reversing the large-scale outflow trend of previous months. The total asset management scale (AUM) of gold ETFs in the Chinese market increased 3% to RMB 250 billion, and total holdings increased by 5 tons to 282 tons.
Main influencing factors: Continued geopolitical uncertainty, weakening stock markets, continued increase in gold holdings by the People's Bank of China, and increased participation of institutional investors.
From January to July of this year, gold ETFs in the Chinese market still achieved a net inflow of 45 billion yuan, the second strongest performance in the same period of the year, reflecting an increase in institutional investors' participation and willingness to allocate gold against the backdrop of multiple uncertainties.
It is worth noting that as of August 12, total gold ETF holdings in the Chinese market had increased by about 8 tons, and fund inflows were recorded almost every day, mainly supported by strong trend momentum in gold prices.
Demand and total holdings of gold ETFs in the Chinese market
Gold futures trading volume declined, and net long positions increased
In July, the volume of gold futures trading on the Shanghai Futures Exchange declined further, with the average daily trading volume falling 4% month-on-month to 292 tons.
As the volatility of gold prices declined, futures trading cooled slightly. By the end of July, the net long holdings (limited by data) of the top 20 gold futures participants on the Shanghai Futures Exchange had increased by 24 tons to 117 tons, reflecting an improvement in market sentiment.
Upstream physical gold demand is still weak
In July, upstream physical gold demand fell 8% month-on-month to 80 tons. The decline was mainly affected by seasonal factors.
Investment demand remained roughly the same as in June, so it was unable to offset the weakening of jewellery-related consumption.
On a year-on-year basis, gold shipments from the Shanghai Gold Exchange fell 15%, reflecting the fact that jewellery consumption is still sluggish against a backdrop where gold prices are higher than the same period last year and consumer confidence is still weak.
Monthly gold shipments and ten-year monthly average from the Shanghai Gold Exchange
While the rise in gold prices is slowing, the People's Bank of China continues to increase its gold holdings
In July, the official gold reserves of the People's Bank of China increased by 20 tons, setting the largest monthly purchase scale since October 2023. It also extended its continuous gold purchase record to 21 months, setting the longest continuous gold purchase record ever recorded, driving the official gold reserve to 2,366 tons, accounting for 8% of foreign exchange reserve assets.
It is worth noting that the People's Bank of China continues to accelerate the pace of gold purchases, highlighting the strategic role of gold in diversifying reserves against the backdrop of an increasingly fragmented geopolitical landscape.
The People's Bank of China announced the purchase scale and price of gold
Gold imports increased in June
In June, the Chinese market imported 152 tons of gold, a slight increase of 2 tons from May, the highest level since March 2024.
In the first half of the year, China imported a total of 764 tons of gold, a sharp increase of 138% over the same period last year. Demand for investment purchases was strong during the period.
Net import volume of gold under customs code 7108
Future prospects
If gold prices continue to break through the upward trend, demand for gold investment may improve. However, the domestic stock market rebounded in early August, and if the A-share rally continues, it may divert the market's attention from gold. Increased restocking volume from jewellers may provide seasonal support for upstream physical gold demand.