China Buys Less Jewellery, More ETFs: What It Means for Gold Prices Globally

In times of global uncertainty, gold has long been seen as a safe haven for investors. In China, however, a noticeable shift is underway: consumers are moving away from traditional gold jewellery and turning instead to gold ETFs (exchange-traded funds), bars, and coins.

While wholesale demand for gold jewellery has slowed, investment in gold ETFs is hitting record highs. In the first half of 2025, China invested ₹64,000 crore (US$8.8 billion) in gold ETFs — the highest-ever half-year investment, according to the World Gold Council.

This trend comes even as China’s overall gold activity slowed in June 2025, a month that saw only 90 tonnes of gold withdrawn from the Shanghai Gold Exchange (SGE) — well below the 10-year average for June. Between January and June, total withdrawals stood at 678 tonnes, an 18% drop compared to the same period last year.

The shift away from gold jewellery is evident. In May, China imported 89 tonnes of gold, down 21% from April and 31% lower than May 2024. The wholesale gold jewellery market dropped by 10% in June, as high gold prices discouraged buyers.

Despite lower physical withdrawals, gold prices surged by 23% in US dollars and 21% in Chinese yuan in the first six months of 2025 — the fastest growth since 2016. The price spike appears to reflect strong global demand and reduced physical withdrawals due to higher costs.

Meanwhile, China’s central bank — the People’s Bank of China — continued its buying spree for the eighth consecutive month, adding 19 tonnes of gold to its reserves in the first half of the year. China’s total gold reserves now stand at 2,299 tonnes.

Even as gold futures trading slowed in June, the average daily trading volume between January and June hit 534 tonnes, the highest ever recorded.

This surge in investment demand — especially in ETFs — combined with reduced physical gold availability, has also pushed gold prices higher in India. If prices remain high, it could affect domestic jewellery sales during wedding and festive seasons, which are traditionally strong periods for gold buying. This may in turn impact jewellers and small traders.

Looking ahead, the World Gold Council has forecast that a stronger US dollar and rising Treasury yields may exert downward pressure on gold prices. In the medium term, prices could soften due to a dip in central bank purchases and reduced retail investment demand.