Jul 29, 2024 10:44 PM IST
Hong Kong jeweller Chow Tai Fook reported a 20% year-on-year decline in sales and a 26% fall in same store sales in mainland China, and by 31% in Hong Kong/Maca
China, one of Asia’s biggest consumers of gold apart from India is slowly turning its back against it, Christopher Wood, global head of equity strategy at Jefferies wrote in his weekly note to investors, GREED & fear, adding that Gold recently moved to a discount in Shanghai for the first time since June 2023, dropping from a $63/ounce premium to international prices in mid-June to a $12/oz discount last week.
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Another evidence of gold’s demand weakening in China is Hong Kong-based jeweller Chow Tai Fook reporting a 20% year-on-year decline in sales and same store sales declining 26% in mainland China, and by 31% in Hong Kong/Maca, for the first quarter of the financial year 2024-25.
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“According to the National Bureau of Statistics, retail sales value of gold, silver and jewellery at enterprises above a designated size declined by 3.7 per cent YoY in June following 11 per cent YoY decline in May. It was up only 0.2 per cent YoY to Rmb172.5 billion in H1-CY24, compared with a 13.3 per cent YoY increase in 2013. China gold imports plunged 58 per cent MoM and 40 per cent YoY to 58.9 tonnes in June, the lowest level since May 2022. Such data presumably reflects Chinese consumers’ resistance to rising gold prices in renminbi terms,” Wood wrote in his note.
Why is China’s gold demand falling?
The January-March quarter found gold jewellery demand in mainland China declining 6% year-on-year to 184.2 tonnes from 195.6 tonnes earlier, according to the World Gold Council (WGC).
Gold prices internationally has also been rising over the last 12-18 months due to demand from global central banks, which contributed at least 10% to gold’s performance in 2023 and around 5% in 2024, according to the report.
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Central banks in 2023 added 1,037 tonnes of gold, which was the second-highest annual purchase in history. This followed a record high of 1,082 tonnes in 2022, according to the WGC.
