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Chinese Gold Buying 'Robust' Amid Lunar New Year Consumer Downtrend

2022 starts strong for No.1 gold coin, bar and jewelry buyers...
LUNAR NEW YEAR 2022 saw demand to buy gold in China, the precious metal's No.1 consumer nation, hold flat from 12 months before according to expert analysts – making it "an excellent result".
"Chinese New Year sales in 2021 had been exceptionally strong," bullion-market consultants Metals Focus explain, with demand to buy gold enjoying "a strong boost" from pent-up demand and disposable savings after the Covid Crash of 2020.
Now matching that boom, "robust" household gold demand before and during February 2022's spring festival holidays came after late-2021 saw jewelry demand rise by nearly 1/4 from a year before in terms of gold weight, aided by a dip in Yuan prices.
This month's positive gold shopping trend contrasts with China's wider picture of household spending, as consumption during the week-long holiday " failed to get anywhere near pre-pandemic levels," according to the South China Morning Post.
Cinema box-office takings were, like gold buying, very close to last year's rebound, but domestic as well as foreign holiday trips sank versus pre-Covid figures, and "some analysts warn that the downtrend could signal a worsening economy," says the newspaper.
China's gold retailers "put immense resources to help promote the festive season," says Metals Focus, because New Year jewelry sales "usually account for about 30% of the annual total."
Leading the strong buying so far in 2022, "[Gen Z] is one of the cohorts that has the ability [to pay] and is most willing to spend big," says Chan Sai-cheong, managing director at the giant Chow Tai Fook jewelry group (HKG: 1929).
"Many of them are not breadwinners of their families, so they can enjoy life more compared with their parents," he says, adding that a trend of 'China-chic' drove demand for domestic over foreign brands ahead of the New Year, including Chow Tai Fook's own "heritage" collection.
Chart of China's household gold demand by weight and $ value. Source: BullionVault
With spring festival 2022 matching last year's demand on Metals Focus' initial research, mainland China's jewelry purchases by weight had jumped at the start of 2021, rising more than 3-fold from New Year 2020's dramatic crash as the Covid pandemic took hold, and reaching its highest first-quarter level since gold prices set multi-year lows at the start of 2015.
Demand for gold coins, kilobars and other retail investment products meantime reached its highest New Year level since 2017 according to data compiled and analyzed by Metals Focus for the mining industry's World Gold Council.
Altogether on BullionVault's analysis, that saw January-to-March 2021 set China's 3rd highest consumer gold-buying on record by bullion Dollar value, lagging only the first two quarters of 2013, when a price slump in the precious metal unleashed record jewelry demand across Asia.
Sales were then firm across 2021, taking China's full-year household gold demand 56% higher on a per capita basis from 2020's decade-low and recovering the 5-year pre-Covid average of 0.67 grams.
Dollar gold prices have so far averaged $1815 per ounce in 2022, a rise of 1.1% from last year's new Q1 record.
"A slowdown in Chinese growth spilling over from the domestic property sector could diminish physical demand for the metal," says Jonathan Butler at Japanese conglomerate Mitsubishi's precious metals division.
But to counter the risk of an economic slowdown, and in contrast to Western central banks such as the US Fed, the People's Bank has begun trimming its key interest rates, notes Ray Jia, senior analyst for China at the World Gold Council, and that easier monetary policy " paints a positive picture for 2022's retail gold investment demand...[as well as for] institutional investors' interest in gold."

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