Gold Demand Is Expected To Rise As China Enters Peak Buying Season.

(October 21, 2024 - Heraeus Precious Metals)

Gold withdrawals from the Shanghai Gold Exchange (SGE) rose by 12.8% month-on-month in September, following the seasonal trend as wholesalers stocked up for the Golden Week holiday in early October. Withdrawals from the exchange represent gold demand from wholesalers and banks within China. As we move deeper into Q4, consumer gold demand is expected to stick to its seasonal pattern and pick up. The saving rate of the Chinese population is near record highs, while consumer confidence is near record lows, implying there is cash to be spent but not the willingness to spend it. If government stimulus raises consumer sentiment, consumer spending could rise – a portion of which is likely to be directed at jewelry and luxury goods. The high gold price is likely to be impacting absolute levels of demand, but the trend is still there.

While withdrawals from the SGE are improving, they are doing so at a lower level compared to 2023 and the 5-year average. Given that SGE withdrawals were down 31% year-on-year in Q3’24 at 305 tons, annual gold demand could contract in China this year – even with withdrawals on the rise. Q4 consumption would have to outperform 2023, which looks unlikely even with stimulus efforts.

Gold hit another new all-time high last week, managing to push above $2,700/oz for the first time ever, despite the US dollar showing continuing strength. The ECB cut interest rates for a third time last Thursday as the emphasis for the central bank shifts from inflationfocussed to growth-focused. Continuing monetary easing in Europe should weaken the euro relative to other major currencies and support the euro gold price, which also reached another all-time high last week. The gold price has risen by almost a third this year, so far just beating-out its 2007 full-year performance of 30.9%. 2024 is certainly an historic year for gold, and is shaping up to be the best year in terms of price performance in 45 years.