On 31 January, the World ** Association released the "China ** Market Review and Trend Analysis" report for the full year and fourth quarter of 2023, showing that in 2023, China's gold jewellery consumption demand will be 630 tons, a year-on-year increase of 10%; Bar and coin demand was 280t, up 28% y-o-y; As of the end of 2023, ETFs (exchange traded) held a total of 615 tons, an increase of 10 tons (net inflows of about 5 billion yuan in 2023), and its total assets under management (AUM) reached a record high of 29 billion yuan at the end of 2023.
In 2023, China's official reserves increased month by month, with 225 tonnes of gold purchased in 2023, and by the end of 2023, total official reserves reached 2,235 tonnes, accounting for 4 of the total reserve assets3%。Since November 2022, the People's Bank of China has increased its reserves** for 14 consecutive months, with a cumulative increase of 287 tonnes.
In Q4 2023, China's jewellery consumption demand was 148t, down 4% from Q3 but up 17% y-o-y. Bar and coin demand was 83t, up 35% y-o-y and 1% higher than Q3 volumes, the strongest since 2018. In the fourth quarter of 2023**, the total holdings of ETFs increased by 2t, and the continuous net inflow was about 1 billion yuan; The People's Bank of China purchased 44 tonnes of gold in the fourth quarter of 2023.
Specifically, in 2023, domestic jewellery spending reached a record high of RMB282 billion, due to the soaring RMB gold price. Wang Lixin, chief executive officer (CEO) of the World ** Association in China, said that this is mainly due to the recovery of China's economy, the increasing attractiveness of ** to consumers seeking to preserve value, and the growth in demand for wedding gold jewellery. China's gross domestic product (GDP) grew by 5 percent year-on-year in 2023At 2%, the economic recovery laid the foundation for a rebound in domestic jewellery demand. With consumers' willingness to save hovering at all-time highs, jewellery, long seen as a store of value, is attracting increasing attention. This sentiment is also reflected in the 13% year-on-year increase in sales of gold jewellery and other jewellery items, which outpaced other retail categories. In 2023, the recovery in marriage rates and the improvement in demand for wedding jewellery provided additional support.
However, total jewellery consumption in 2023 remains below the long-term average, down 1% from pre-pandemic levels in 2019. In the context of gold prices**, coupled with consumers' increasing preference for lightweight products, to a certain extent, the consumption demand for large grammage gold jewellery in China has been limited. At the same time, the overall decline in the marriage rate in recent years has led to a decline in wedding jewellery consumption, further weighing on consumer demand.
In 2023, jewellery with a small grammage and a lower total price is more popular than other products. According to the China Jewellery Retail Market Insights 2023, products weighing less than 10g and less than RMB2,000 contribute the most to jewellery retailers' sales. Lightweight, hard gold jewellery and smaller gold jewellery products perform better than other categories of products in the market when the labor cost is reasonable.
Q4 2023 jewellery demand in China was 17% below the 10-year average of 170t in Q4, falling short of industry expectations. According to Wang, the main reasons include the fact that consumers' budgets for jewellery purchases during the 11th week were crowded out by spending on entertainment such as travel, the Q4 gold price** and the late arrival of the Spring Festival holiday to postpone the traditional jewellery sales season to January 2024.
According to the world's **association**, China's jewellery demand may face challenges in 2024. While the traditional peak sales season before the Chinese New Year holiday is likely to deliver strong jewellery demand in Q1 2024, high gold prices and a potential slowdown in economic growth thereafter could weigh on China's jewellery consumption. In addition, changes in the marriage rate in 2024 may also have a potential impact on wedding jewellery demand. And as consumers begin to look for low-cost products, jewellery retailers' profit margins will also be squeezed. Coupled with the fierce competition in the saturated jewellery market, the jewellery retail landscape is likely to be more complex in 2024.
In 2023, China's bar and coin demand was 6% higher than the 10-year average. This year, the strong performance of the RMB gold price attracted investors' attention, and the People's Bank of China continued to announce purchases**, further enhancing the attractiveness of **. In addition, end-of-year gift demand in 2023 provided an additional boost to bar and coin demand in Q4 2023.
While total ETF holdings increased by 20% in 2023, total AUM in RMB jumped by 34%, thanks to a significant increase in the RMB gold price. The considerable increase in gold prices, the underperformance of major RMB assets, global economic and geopolitical uncertainties, the increased publicity and promotion efforts of **ETF issuers, and the leading role of global central banks and the People's Bank of China in gold purchases are the main driving factors for the net inflow of **ETFs in the Chinese market in 2023.
China's bar and coin demand is likely to remain strong in 2024, but may not be as strong as it is in 2023. "Central banks' continued buying posture and underlying geopolitical and economic uncertainty are likely to continue to support bar and coin sales in 2024. However, given the high gold price and the possibility of slower revenue growth, bar and coin sales in 2024 may not be on par with 2023. Wang Lixin said.