According to a report by Ray Jia, Head of Research, China at the World Gold Council, China concluded the first half of 2025 with its strongest gold price performance in nine years. This was supported by robust investment demand and sustained central bank purchases, despite ongoing weakness in consumer and jewelry demand.
Record Price Performance in H1 2025
The LBMA Gold Price PM in U.S. dollars rose by 23%, while the Shanghai Gold Benchmark Price (SHAUPM) in Chinese yuan climbed 21%, marking the best semi-annual performance since 2016.
This strength was driven by a weaker U.S. dollar, escalating geopolitical risks, and continued central bank buying—factors highlighted by the World Gold Council’s proprietary return attribution model.
Persistent Weakness in Physical Demand
Withdrawals from the Shanghai Gold Exchange (SGE) dropped 10% month-over-month in June to 90 tonnes.
Total H1 withdrawals stood at 678 tonnes, down 18% year-over-year and 22% below the 10-year average.
Elevated gold prices, declining consumer confidence, and ongoing restructuring of the jewelry sector weighed heavily on demand for gold products.
Retailers remained cautious with inventory restocking due to high price levels.
Even bar and coin investment saw a slowdown in June amid limited gold price fluctuations.
Record Inflows into Gold ETFs
Chinese gold-backed ETFs recorded positive inflows of CNY 1 billion (USD 137 million) in June.
The funds attracted CNY 64 billion (USD 8.8 billion) in H1 2025—the highest on record.
Total assets under management (AUM) rose to CNY 153 billion (USD 21 billion).
Combined gold holdings surged 74% to reach 200 tonnes.
Record Futures Market Activity
Though SHFE gold futures trading volume dropped 39% in June to 380 tonnes per day, the H1 daily average reached 534 tonnes, an all-time high.
High prices, market volatility, and geopolitical uncertainty drove investor activity in futures contracts.
PBOC Continues Gold Buying
The People’s Bank of China (PBoC) added 2 tonnes of gold in June, marking its eighth consecutive month of purchases.
Total H1 purchases reached 19 tonnes, bringing official reserves to 2,299 tonnes.
The share of gold in total foreign reserves rose from 5.5% in December 2024 to 6.7% by June 2025.
Imports Decline
Chinese customs data showed net gold imports fell to 89 tonnes in May, down 21% month-over-month and 31% year-over-year.
The decline reflects subdued physical demand and reduced withdrawals from the SGE during the same month.
Outlook
Consumer confidence and the restructuring of China’s jewelry industry will likely continue to drag down physical gold demand in H2 2025.
However, I believe investment demand for gold will remain strong, driven by global volatility, monetary policy shifts, and fluctuations in alternative asset performance.
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