Gold ETFs attract strong investment inflows
Chinese gold ETFs recorded inflows for the third consecutive month in September, adding 11 tonnes and taking total holdings to a record 304 tonnes at the end of the month. Assets under management (AUM), however, declined 2% during September to RMB 276 billion ($41 billion), as lower gold prices offset the impact of fresh investments.
For the third quarter as a whole, ETF inflows reached RMB 27 billion, lifting AUM by 13% and increasing holdings by 27 tonnes. The positive quarter offset losses recorded in the second quarter, putting Chinese gold ETFs on course for a record year in terms of year-to-date inflows, the WGC said in its September China gold market update.
Ray Jia, research head for China at the World Gold Council, attributed the strength in investment demand to rising portfolio diversification needs amid weakness in local equity markets. Declining government bond yields also reduced the opportunity cost of holding gold, while repeated announcements of central-bank purchases provided further encouragement to investors.
Demand continued into early October as investors sought to diversify their portfolios amid sustained weakness in Chinese equities.
Physical gold demand remains under pressure
The strength in ETF investment has not translated into a comparable recovery in wholesale gold demand. Banks, jewellers and other market participants withdrew 92 tonnes of gold from the Shanghai Gold Exchange (SGE) in September, a 48% increase from August. However, withdrawals remained 22% lower than a year earlier.
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The monthly improvement was supported by seasonal restocking ahead of China's National Day holiday in early October, traditionally the beginning of the fourth-quarter peak jewellery sales season. A pullback in gold prices also encouraged some buyers to purchase bullion at lower levels.
Despite the improvement, wholesale gold demand totalled 234 tonnes in the third quarter, down 21% year-on-year and significantly below the 10-year average. The WGC identified persistently weak jewellery consumption as the main drag on demand.
The distinction matters because SGE withdrawals indicate wholesale market activity rather than directly measuring final consumer purchases. Seasonal replenishment and investment-related buying can support monthly withdrawals even when underlying jewellery consumption remains subdued.
High gold prices reshape jewellery consumption
The weakness in physical demand is also reflected in China's jewellery market, where consumers are adjusting the quantity and type of gold they buy.
According to the WGC's 2026 Chinese jewellery retailer survey, gold jewellery consumption fell 30% year-on-year by volume in the first half of 2026 to 136 tonnes. Yet the value of consumption rose 5% to RMB 144 billion, the second-highest first-half level on record.
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The divergence suggests that consumers are continuing to spend on gold jewellery but purchasing lighter pieces as elevated prices stretch household budgets. Gold jewellery accounted for 60% of retailers' revenue by value in the first half, retaining its position as the largest category despite a modest decline in its dominance.
Retailers are responding by changing their product mix. More than 40% of surveyed retailers plan to increase their allocation to jewellery weighing less than five grams, while 47% intend to expand offerings in the five-to-10-gram category. Heritage and Hard Pure gold products have also remained comparatively resilient, supported by their combination of design appeal, affordability and perceived gold value.
Weak consumer confidence and the additional value-added tax burden introduced in November 2025 have added to the pressure on discretionary purchases. The result is a market in which interest in gold persists, but demand measured by weight has weakened.
Central-bank purchases provide another source of demand
China's official gold accumulation has continued alongside private investment inflows. The People's Bank of China (PBoC) purchased 23 tonnes of gold in September, its largest monthly addition since October 2023, taking its third-quarter purchases to 63 tonnes.
The September addition brought China's official gold holdings to 2,410 tonnes, equivalent to 8.5% of its total reserves. The central bank accumulated an additional 103 tonnes in the first nine months of 2026, extending its monthly buying streak to 23 months.
The central bank's purchases provide a separate source of demand from ETF investments and jewellery consumption. Together, these trends show how official reserve accumulation and private portfolio diversification can sustain interest in gold even when physical consumer demand remains weak.
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What lies ahead for China's gold market?
The outlook remains divided between investment demand and jewellery consumption. The WGC expects prevailing macroeconomic conditions to remain supportive of bullion investment, while the traditional fourth-quarter peak season could provide a seasonal boost to jewellery sales.
Price movements will remain important. The international gold benchmark fell 8.5% in September, while China's Shanghai Benchmark Gold Price declined 5.5% in renminbi terms. Gold stabilised in early October, with the domestic price hovering around RMB 900 per gram and the international benchmark holding above $4,100 an ounce as of October 12.
However, seasonal demand may not be enough to overcome affordability constraints and weak consumer confidence. For China's gold market, the key question is whether investment demand can remain strong while jewellery consumption gradually adjusts to higher prices.
The latest data point to a market being reshaped rather than moving uniformly in one direction: financial investment is strengthening, central-bank buying continues, and jewellery consumers are adapting their purchases to a more expensive market.
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