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China’s Gold Appetite Dwindles as Economic Strains Impact Retail Demand June 27, 2023 (0 comments)

Beijing, China--Amid a backdrop of economic strains, China's robust gold buying spree is decelerating, as reflected in dwindling retail demand, according to Bloomberg.

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According to the report, early 2023 saw an accelerated surge in gold and silver jewelry sales. Still, by May, the expansion rate had reduced to 24% year-on-year, indicating the first slowdown this year.

The report noted that China and India are major gold bars, jewelry, and coins consumers. The nation experienced a strong gold sales surge, showing increases of 37% and 44% in March and April, respectively, driven by pent-up demand after the pandemic restrictions were lifted.

The cooling trend in May resonates with China's economy. The country's economic expansion has been sputtering following a robust first-quarter performance. Industrial output, retail, and investment all declined. Unemployment rates for ages 16 to 24 also soared.

As per the report, in response to the economic slowdown, Beijing has proposed direct stimulus measures, and the nation's central bank has initiated the first interest rate cuts since last August to promote spending.

Yet, gold demand is projected to weaken further in June. The Shanghai gold price is currently trading at a discount to the global rate, as reported by Bloomberg, referencing data from the World Gold Council.

The report noted that despite the slowdown in retail sales, gold, as a safe-haven asset, is expected to retain its high valuation, buoyed by geopolitical conflicts and recession concerns.

Also adding to the high price are foreign central banks, which have accumulated the reserve asset substantially over the past quarters. This is part of their strategy to decrease dollar reliance, a decision influenced by the impact of dollar sanctions on Russia.

As per the report, China is following suit, with its central bank currently holding 2,092 tons of gold, having accumulated 160 tons in the past seven months.

Learn more in the entire Insider report.