Latest industry statistics indicate that China's overall gold consumption experienced moderate growth in the first half of the year, with total demand reaching 511.41 tonnes, a marginal year-on-year increase of 1.23%. However, beneath the surface of stable aggregate volume, the underlying consumption dynamics within the market are undergoing a profound shift. Sustained record-high retail prices have significantly dampened enthusiasm for traditional jewelry, causing sales to plummet nearly 34% year-on-year to 132.13 tonnes. Elevated per-gram prices have prompted many retail consumers to adopt a wait-and-see approach, making the jewelry segment the primary drag on overall consumption. Meanwhile, industrial gold demand has also been squeezed by rising production costs, declining to 39.94 tonnes.
In stark contrast to the sluggish jewelry market, the physical investment sector has witnessed explosive growth. Consumption of gold bars and coins surged 28.42% to 339.34 tonnes, accounting for the absolute majority of total consumption. Analysts note that periodic volatility and pullbacks in gold prices have instead stimulated the market's appetite for buying the dip. Investors have actively allocated physical assets through channels such as banks, seeking to preserve and grow their wealth amidst market fluctuations. This structural shift toward prioritizing investment over consumption underscores the profound impact of persistently high gold prices on household asset allocation preferences.
On the supply side, domestic mined gold production has faced certain constraints. Concentrated safety inspections and environmental governance campaigns in key producing regions have led to temporary suspensions at several large mines, causing domestic mine gold output to drop 14.62% to 152.91 tonnes. However, gold production utilizing imported raw materials has maintained its upward momentum, rising to 77.08 tonnes. This has helped offset the shortfall from domestic mines to a certain extent, keeping total national gold production at 229.99 tonnes, representing a year-on-year decline of 9.01%.
Beyond shifts in supply and demand fundamentals, adjustments to gold trading rules by domestic financial institutions have also drawn widespread market attention. Recently, several major commercial banks, including the Industrial and Commercial Bank of China, have successively suspended Shanghai Gold Exchange-related services for retail clients, covering both spot and deferred contracts. Industry observers argue that this move is not intended to restrict gold investment, but rather serves as a regulatory and channel-level strategy to guide household savings from paper trading into physical assets. A founder of an overseas fund noted that China has been actively pursuing a strategy of accumulating physical gold on dips. Guiding depositors to hold physical metals is a continuation of this long-term asset allocation strategy, reflecting an increasing emphasis on physical assets amid a complex macroeconomic environment.
