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  • China’s gold market in August: local price premium extended its rise
  • China’s gold market in August: local price premium extended its rise

    14 September, 2022

    Key highlights:

    • The Shanghai Gold Price Benchmark PM (SHAUPM) in RMB rose by 0.5% in August while the LBMA Gold Price AM in USD saw a 2.6% fall 
    • The average Shanghai-London gold price spread climbed further in the month, driven by stronger demand1  
    • Seasonal strength and robust consumption supported gold withdrawals from the Shanghai Gold Exchange (SGE) in August, witnessing both m-o-m and y-o-y rises.     
    • Total assets under management of Chinese gold ETFs stood at 58.3t (US$3.3bn, RMB22.6bn) at the end of August, a 7.7t (US$485mn, RMB2.8bn) outflow over the month.2  

    Looking ahead:

    • In late August more and more cities were implementing soft or partial lockdowns to contain recent COVID-19 case resurgences;3  this could weigh on local gold consumption in the near term
    • The annual Shenzhen Jewellery Fair – scheduled for early September – was postponed due to a pandemic outbreak, dialling down business activities in China’s main   gold manufacturing hub.4  The pandemic has also impacted the exhibitions that manufacturers usually hold during September and prevented clients’ trips to Shenzhen. This could also potentially weigh on wholesale gold demand. 

    Local gold price premium continued to rise 

    Regional gold performances diverged in August. While the US Fed’s hawkish stance in monetary tightening and softer inflation expectations weighed on the USD gold price, the SHAUPM in RMB saw a marginal increase. This was primarily driven by the RMB’s 2% depreciation against the dollar – thanks to a strong dollar and sluggish economic activities in China. 

    Stronger gold consumption in China – see below for more – may also have contributed to the local gold price’s outperformance relative to its USD peer. Consequently, the Shanghai-London gold price spread continued to rise in August. The spread reached US$10.6/oz on average in the month, US$4.2/oz higher m-o-m and US$4.8/oz higher y-o-y. 

    The local gold price spread continued to trend up

    Wholesale gold demand climbed higher 

    Gold withdrawals from the SGE totalled 166t in August, representing a 3% m-o-m rise and a 11% y-o-y increase. This was impressive given COVID-19 resurgences and subsequent restrictions imposed on mobility in cities such as Sanya. 5   

    We believe such strength mainly came from manufacturers stocking up in August ahead of the upcoming peak gold consumption season. China’s gold product manufacturing hub, Shenzhen, was not impacted by the pandemic resurgence in August. A relatively stable local gold price later in the month may have helped too. 

    Wholesale demand continued to climb in August

    Chinese gold ETFs lost 7.7t in August

    Chinese gold ETF holdings decreased by 7.7t (US$485mn, RMB2.8bn) in August, declining to 58.3t (US$3.3bn, RMB22.6bn) by month end. The rebound in the local gold price early in the month may have led to higher profit-taking activities, while a more stable gold price later in the month could have reduced investor interest – a lower volatility often means fewer profit opportunities.

    There was a sizable outflow from Chinese gold ETFs in August

    Gold imports kept surging in July

    China’s gold imports rocketed, increasing by 71t m-o-m and 111t y-o-y; total gold imports amounted to 178t in the month – the highest July since 2017.8 This reflects the combination of recent strong gold demand and a rising local gold price premium, which often incentivises importers.

    Gold imports kept surging


    1. We compare the LBMA Gold Price AM to SHAUPM because the trading windows used to determine them are closer to each other than those for the LBMA Gold Price PM. For more information about Shanghai Gold Benchmark Prices, please visit Shanghai Gold Exchange.
    2. Please note that the inflow/outflow value term calculation is based on the difference between end-of-period assets under management, which is based on the end-of-period Au9999 prices in RMB and the USD/CNY rate.
    3. For more information, see: 33 Cities in China Are Under Some Sort of Lockdown (caixinglobal.com)
    4. For more information, see: China's Shenzhen to adopt tiered COVID measures; Chengdu extends lockdown | Nasdaq 
    5. For more information, please visit: Several cities in China add COVID-19 curbs as millions still under lockdown (rappler.com) 
    6. Data from China Customs only dates back to 2017.