Twinkle, Twinkle… little stars in China’s skies are not diamonds, but gold coins

Diamonds are no more forever in China. This, when the country has remained for years the world’s second biggest market for the precious stone after the US.

Instead, Chinese people, especially the youth, have shifted towards buying gold—the safe haven metal.
Chinese are now rivalling Indians in their love for the precious metal, in fact China replaced India as the top gold consumer of the world in 2023.

The reason is simple: amid slowdown in the China’s economy, real estate has lost its charm and so have deposits with banks that are giving as low as less than 2 per cent returns. Added to this, the yuan has weakened and stock markets are in meltdown.

Gold has become the sole commodity that has such integral value that can be used as an instrument of savings and investment. Diamonds, on the other hand, have lost in the estimation of people in China owing to its exorbitant cost and the corresponding lower value in seller’s market.

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Young, less affluent, but more stomach

Another interesting trend in this gold rush—domestic gold prices scaled new highs last year and yet youngsters are so desperate for the yellow metal that they are eating less and saving more to buy it—is that tier-3 and -4 cities and the less affluent of the Chinese society are leading the country in buying gold.

This even though buying gold as bars etc attracts extra processing fees.

Experts have attributed this trend in lower tier cities and provinces to the aggravated and magnified effects of the general economic downturns. An example would be that houses and real estate are selling at relatively lower prices here.

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Consequently, China’s gold retailers are now more bullish on these low-end markets. Country’s biggest gold jewellery retailer Chow Tai Fook, according to a report in the South China Morning Post, has concentrated in expansion on lower tier cities.

September last, Chow Tai Fook had 7,699 points of sale as compared to just 3,855 in March 2020: 45.5 per cent located in tier-3 and -4 cities, up from 33.3 per cent in March 2017.

How golden is gold in China?

According to China’s state broadcaster CCTV, the annual per capita consumption of gold in tier-3 and lower cities spiked to 617.5 yuan in 2022 as compared to 460.7 yuan in 2017. This rate is higher than the national average as well as the consumption levels in tier-1 and -2 cities.

While the global annual bar and coin investment, according to the figures for 2023 released by World Gold Council (WGC), slid by 3 per cent—the overall global demand slipping by 5 per cent—China’s gold demand spiked by 16 per cent, the country’s jewellery demand increasing 10 per cent. The corresponding investments up by 28 per cent from 2022.

From January to November 2023, the retail sales for gold and silver jewellery pipped the overall retail sales of consumer goods.