Chinese Gold market in expansion mode – Commerzbank

FXStreet Insights Team FXStreet

China imported large quantities of Gold from Hong Kong for the second month in a row in May. According to data from the Hong Kong Statistics Department, net shipments to China amounted to 48.1 tons, compared to 43.4 tons in April.

Gold demand in China can increase further

"In the first three months of the year, China had exported a net of 36 tons of Gold to Hong Kong. This indicates an increase in demand for Gold in China, despite the high prices. The uncertainty associated with the US tariff policy is likely to have been a key driver, which is why Gold was in greater demand as an investment and safe haven among Chinese investors, while demand for jewellery is likely to have remained subdued due to the high prices."

"China intends to increase its exploitable Gold resources by 5-10 percent by 2027, possibly to meet the rising demand for Gold, as reported by the Ministry of Industry and Information Technology at the beginning of last week. China's Gold production is to be increased by more than 5 percent within the next two years. China is already the world's largest Gold producer, but is still reliant on imports to meet domestic demand for Gold."

"Gold demand in China could increase further following the start of trading in two new yuan-denominated Gold contracts on the Shanghai Gold Exchange in Hong Kong last Thursday. The SGE has also set up a vault in Hong Kong for the storage of physical Gold. In addition to cash settlement, physical delivery is also possible. There is now an easier way for international investors to invest in the Chinese Gold market. Physically backed Gold contracts serve as collateral for Gold ETFs in China, which have been enjoying rising demand for several months."

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FXStreet Insights Team

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