Chinese Gold demand: A tale of two sectors

The Chinese gold market is a tale of two sectors.

The jewelry sector is struggling due to high prices, while gold investment has been red-hot.

According to Metals Focus, increasing safe-haven and wealth preservation demand have boosted gold investment. However, high prices and a reduced appetite for consumer spending have created headwinds for the jewelry sector.

High prices drag down Chinese Gold jewelry market

Metals Focus analysts say gold jewelry demand fell by 25 percent in 2025 and remained weak through the first two months of 2026.

In 2025, Chinese gold jewelry demand was 360 tonnes. That was less than half the 2023 jewelry demand of 630 tonnes.

Analysts say that sentiment among jewelry sellers and manufacturers was poor to start the year. Against this backdrop, retailers were cautious about stocking inventory leading up to the Chinese New Year holiday.

“These concerns proved justified, as in addition to high prices, competition from consumer spending on tourism and entertainment, lower disposable incomes, and a preference for lighter pieces all resulted in notably lower sales.”

Chinese investors want Gold

In contrast, higher prices drove a boom in gold investment demand. Investors snapped up a record high of 432 tonnes of gold bars and coins in 2025, a 28 percent year-over-year increase. It was the first time physical investment demand outpaced gold jewelry demand.

Metals Focus analysts say Chinese investors aggressively bought price dips during last year’s bull run.

“Feedback suggests that corrections were often seen as opportunities by investors who had missed the previous upward movement, attracting fresh interest from non-traditional gold investors and providing a solid floor for prices.”

High net worth investors added more gold to their portfolios as a diversifier due to domestic and global economic uncertainty, coupled with unpredictable U.S. policy.

According to Metals Focus, changes in value-added tax (VAT) policy also gave investment gold demand a boost compared to jewelry.

“In late 2025, the jump in effective buy-sell spreads for gold jewelry, following the VAT policy change, made gold investment products far more attractive in comparison, and also supported gold retail investment in China. Gold investment products sold by SGE/SHFE members, who take delivery of physical gold for investment and subsequently resell it, benefit from at least a 6% VAT price advantage over gold jewelry and other non-investment products. This has intensified the ongoing shift from quasi-investment jewelry purchases to gold bar purchases, a trend that had already begun in 2024.”

Even with the significant price correction in January, Chinese retail gold investment strengthened through the first two months of this year.

“This was evidenced by substantial inflows into GAPs (Gold Accumulation Plans) and rising sales of gold bars, leading to a temporary shortage of certain sizes at bank branches and retail stores before the Chinese New Year.”

Chinese investors have typically preferred physical metal, but there has been a surge in gold ETF investing over the last two years. According to Metals Focus data, Chinese gold-backed funds added 46 tonnes of metal through the first two months of 2026.

A gold ETF is backed by a trust company that holds metal owned and stored by the trust. In most cases, investing in an ETF does not entitle you to any amount of physical gold. You own a share of the ETF, not gold itself. ETFs are a convenient way for investors to play the gold market, but owning ETF shares is not the same as holding physical gold.

According to Metals Focus, Chinese regulators took steps in late January to prevent overheating and shield retail investors from potential losses due to elevated price volatility.

“Commercial banks revised their GAP policies, including increases in minimum subscription amounts and stricter eligibility criteria. The SGE and SHFE raised margin requirements for gold futures and spot deferred contracts multiple times to cool any market fever driven by speculative activity.”

Metals Focus analysts say they remain bullish on Chinese gold investment this year and project a 7 percent increase in demand.

“Persistent safe-haven demand, continued investor confidence in gold, and a projected medium-term rise in gold prices should all support demand.”