Kitco News reports that as the Chinese New Year (CNY) approaches, gold traders and investors are closely monitoring consumer purchases in China, the globe’s largest market for precious metals. This year’s CNY, marking the year of the Wood Dragon, is anticipated with interest due to unique factors that may influence gold sales. Despite high gold prices, strong purchases were noted last year, and the tradition of buying gold during the festival is expected to continue.

According to Kitco News, Metals Focus, a China-based precious metals firm, observes that the Year of the Dragon typically boosts jewelry demand due to its auspicious significance. Factors such as favorable fashion trends and a growing interest in gold as a quasi-investment among younger consumers have supported gold jewelry sales. However, the consultancy points out significant challenges, including economic headwinds and high gold prices, which might dampen consumer enthusiasm for gold purchases this year.

Kitco News highlights that this CNY is only the second since the pandemic, and with more freedom for activities like travel and dining out, gold might face competition from other spending avenues. Despite these challenges, Metals Focus predicts sales will be decent, particularly in value terms, given last year’s strong performance.

Rohit Savant, Vice President of Research at CPM Group, shared with Kitco News an optimistic outlook, suggesting that the aftereffects of COVID might boost this year’s gold sales. With China moving away from its zero-COVID policy and experiencing an upsurge in cases early last year, this CNY presents the first major celebration without COVID as the focal point, potentially spurring demand.

Kitco News notes Savant’s observation of sustained demand in China, influencing the U.S. dollar price of gold and maintaining a high premium between the Shanghai Gold Exchange (SGE) and the London Bullion Market Association (LBMA) prices. The downturn in Chinese equity markets and the real estate sector, along with gold’s role as an alternative investment, are seen as factors bolstering this demand.

Furthermore, Kitco News discusses the potential impact of Valentine’s Day falling within the CNY holiday week, though Savant believes its effect on gold demand may be limited and hard to quantify. Despite typical trends of pre-holiday buying, robust demand has fabricators purchasing up to the holiday, indicating strong market demand this year.

In January 2024, the People’s Bank of China (PBOC) slightly reduced the pace of its gold acquisitions but continued to significantly impact the global gold market.

Kitco News’ Neils Christensen reported earlier today that the Chinese central bank added another 10 tonnes of gold to its reserves in January, marking the 15th straight month of growth in its official gold reserves, though the volume was somewhat lower than in previous months.

Krishan Gopaul, a market analyst at the World Gold Council, mentioned by Kitco News, stated that China’s total gold reserves reached 2,245 tonnes after January’s purchase, an increase of nearly 300 tonnes since the PBOC intensified its gold buying in November 2022.

Despite a decrease in the pace of acquisitions, Kitco News’ interviews with analysts suggest that China is expected to keep expanding its gold reserves as part of its diversification strategy. Gold currently makes up about 4% of China’s total reserves, which is significantly lower than the percentage held by central banks in many developed countries, indicating potential for growth to align with other leading economies.

State Street Global Advisors’ chief gold strategist, George Milling-Stanley, noted in an interview with Kitco News the trend of increasing gold demand among Chinese citizens, particularly leading up to the Chinese New Year. January 2024 saw a surge in physical gold demand, with withdrawals from the Shanghai Gold Exchange reaching near-record levels, the second highest in its history.

Milling-Stanley pointed out that this strong demand for gold reflects its enduring value as a safe-haven asset amid economic instability. Gold’s dual ability to provide portfolio stability and achieve long-term performance gains is especially pertinent as China navigates its economic resurgence.

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