The expected gold purchases for the Chinese New Year did not disappoint! Retailer promotions and the relatively low price of gold have even strengthened the appeal of gold for many.

According to the Shanghai Gold Jewellery Association, gold jewellery consumption in Shanghai reached 1.1 billion Yuan during the festive season, an increase of 12% over the previous year.

Tiger-themed gold products (2022 is the Year of the Tiger in China) and gold jewellery were the most popular.

Due to the variations in COVID in different regions, many chose to cancel their travel plans and stay home. The fact that their planned budget was not used may have given an additional boost to gold jewellery purchases during this period.

Chinese gold demand is expected to remain positive in 2022

On the one hand, the slowdown in economic growth and the downward trend in marriage registrations are likely to limit the growth of the sector, as these are key drivers of gold demand.

But on the other hand, if the gold price were to fall in 2022, Chinese demand for gold jewellery could benefit - it has been shown that when the gold price falls, demand for gold jewellery increases over the same period.

The following factors are therefore likely to bode well for Chinese investment in bullion and coins:

• increasing inflationary pressure
• falling local bond yields
• a weaker Yuan

Other dynamics could also impact gold demand in China this year:

• greater price transparency in the Chinese gold jewellery market
• The changing tastes and mindset of young people who see gold jewellery as an investment but also as a consumer good.
• A greater push by commercial banks in the sale of bullion and coins, with their other retail gold activities remaining limited.

The gold market in China is therefore to be watched closely in the coming months.