Primarily driven by the COVID-19 pandemic and its far-reaching impacts, China’s gold demand in 2020 declined by 27% compared to 2019, the lowest in a decade. One of the side effects from such weakness was the widest Shanghai-London spot gold price discount in history. Averaging -US$24/oz in 2020, the local Chinese gold price spread remained far below its 10-year average between 2010 and 2019.
Our analysis shows:
- China’s gold supply shortage, costs associated with importing gold, as well as restrictions on gold’s imports in China contributed to a local gold price premium during most days
- Significantly weakened gold demand, relatively ample gold supply and the restrictive nature of gold exports could be main drivers for the record-level Chinese gold price discount in 2020
- China’s gold consumption in 2021 is likely to recover further, albeit with challenges.