In May, gold prices experienced a mild decline, ending a five-month upward streak in the Shanghai Gold Benchmark Price (SHAUPM) and halting four consecutive monthly gains in the LBMA Gold Price PM. The weaker gold price was driven primarily by cooling investment momentum, with investors selling gold ETFs and reduced implied volatility, which offset the impact of a weaker US dollar. Despite this dip, gold returns remain robust in 2025, with SHAUPM rising 23% in RMB terms and LBMA gold up 17% in USD.
Seasonal Dip in Wholesale Demand
Gold withdrawals from the Shanghai Gold Exchange (SGE) fell 35% month-on-month to 99 tonnes, reflecting the typical seasonal slowdown in Q2 and early Q3 as manufacturers reduce restocking. Although withdrawals were 21% higher year-on-year compared to the weak May 2024, they remained below the 10-year average. High gold prices have dampened jewelry sales—an important component of SGE withdrawals—thus suppressing wholesale demand.
Gold ETF Outflows After Strong Inflows
Chinese gold ETFs saw outflows of RMB 3.3 billion (USD 461 million) in May, ending a three-month inflow streak. Total ETF assets under management dropped 4% month-on-month to RMB 153 billion (USD 21 billion), and holdings decreased by 4.6 tonnes to 198 tonnes. Improved investor risk appetite, buoyed by a temporary US-China tariff truce and an appreciating RMB, reduced safe-haven demand. However, year-to-date gold ETF inflows remain historically strong, with holdings increasing by 84 tonnes.
PBoC Continues Gold Accumulation
The People’s Bank of China (PBoC) reported gold purchases for the seventh consecutive month, adding 1.9 tonnes in May. China’s official gold reserves now stand at 2,296 tonnes, representing 6.7% of total foreign exchange reserves. In value terms, reserves amount to USD 242 billion, a slight 1% decrease month-on-month due to a softer gold price. Year-to-date, the PBoC has acquired 16.8 tonnes.
Import Activity Rebounds in April
China’s net gold imports rebounded sharply in April to 112 tonnes, up 66 tonnes month-on-month, though down 14 tonnes year-on-year. Rising US-China trade tensions boosted investor safe-haven demand, driving higher bullion sales and ETF demand. A significant local gold price premium further encouraged importers during the month.
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