With prices soaring to record highs, the Chinese are turning to gold to protect their savings in a context of economic uncertainty and real estate crisis. As demand for gold jewellery plummets, sales of bullion and coins are soaring.

Three years after the collapse of Evergrande, China’s property crisis continues to put pressure on a central government facing a worrying economic slowdown. Some analysts are sceptical about the effectiveness of the central government’s proposed measures to boost homebuyer confidence and overall consumption.

Haibin Zhu, chief China economist at JPMorgan, told CNBC in early September that ‘the property market meltdown is not over yet’, adding that China’s ailing housing market will continue to weaken as the government’s series of stimulus and support measures have not been ‘satisfactory’ in shoring up the sector.

Against this economic backdrop, companies have cut wages, young university students are finding it difficult to enter the labour market and Chinese consumers, already prone to saving, have become even more frugal. This has led to a strong demand for gold from Chinese households, who, despite rising prices, continue to regard the golden metal as the best safe-haven asset.

From jewellery to bullion and gold coins

With gold prices having risen for almost two years now – since the beginning of 2024 alone they have already appreciated by 23% – and continuing to hit record highs, it is not surprising that jewellery sales have plummeted globally. In China, jewellery purchases fell 35% year-on-year in the second half of the year.

This is the second-weakest quarter for jewellery demand since 2020, when it was hit hard by the Covid-19 health pandemic. Even so, Chinese consumers and investors have not stopped buying gold, but have shifted away from jewellery to bullion and coins, sales of which are up 46%, according to data from the China Gold Association.

It is clear that Chinese households have turned en masse to buying gold because they have lost confidence in traditional investments such as real estate or stocks. It remains to be seen how the property market and the Chinese economy will evolve, but it is clear that the Chinese population’s demand for gold is far from a crisis.

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