China’s voracious appetite for the precious metal, which peaked in January, has been a crucial pillar in a rally that has taken prices above $2,500 an ounce. If the slowdown persists, it could make further gains more difficult to come by.
Bullion’s surge has been driven by haven demand and optimism that the Federal Reserve will soon begin cutting interest rates, as well as purchases from both Asian consumers and global central banks, including the People’s Bank of China.
The dramatic drop-off in shipments shows how badly the double whammy of lofty prices and a weak economy is affecting Chinese buyers. Bruised by a prolonged property crisis and a weaker local currency, shoppers are now finding that gold is much less affordable. The biggest hit has come to discretionary purchases of item like jewelry, while bars and coins continue to attract demand from investors seeking a store of value in uncertain times.
Just last year, fears over China’s slowing growth helped drive demand for bullion even at elevated prices. That enthusiasm has largely faded, flipping the premium paid on gold in Shanghai to a rare discount in July and August. China’s central bank has also paused its buying program over the last three months, weakening one of the market’s key supports.