Chinese Gold Market Shows Resilience Despite Record ETF Outflows

The yellow metal faced a difficult first half of 2026, with June price drops erasing earlier gains. Ray Jia, head of China research at the World Gold Council, attributed the downturn to hawkish signals from Fed Chair Kevin Warsh, which boosted real yields and the dollar. This environment forced investors to reduce holdings and shift positions, causing both the LBMA and Shanghai Benchmark gold prices to fall 11% during the month.

While ETF outflows dragged total assets under management down to RMB243bn, the year-to-date picture remains historically strong, marking the second-best first half on record. Institutional participation provided a critical floor for demand, bolstered by the People's Bank of China, which increased its reserves for the 20th consecutive month. The central bank added 15 tonnes in June alone, bringing its total holdings to 2,346 tonnes.

Wholesale activity at the Shanghai Gold Exchange offered further signs of recovery, with gold withdrawals climbing 36% to 87 tonnes in June. Although manufacturers remain cautious due to persistent weakness in the jewellery sector, opportunistic restocking and retail interest in bars and coins helped absorb supply. As the market enters the off-season, analysts expect local demand to hinge on the stability of gold prices and the continued performance of Chinese equity markets.