China is the largest gold producing and consuming country in the world. Every year, it sells more than 100 tons of yellow metal products worth tens of billions of dollars. The coronavirus pandemic had a negative impact on the gold market in the Middle Kingdom. Imports of precious metal fell sharply at the beginning of 2020 due to a reduction in domestic demand.
According to the Chinese Gold Association, in the first quarter of 2020, the production of precious metal from domestic raw materials decreased by 10% to 74.4 tons. Primary production amounted to 58.91 tons, and by-production - 15.53 tons. Another 23.99 tons of refined gold were created from imported raw materials, which is 1% higher compared to the same indicator in 2019. In general, in 2020, 98.43 tons of refined gold were produced in the country, which is 7% less in annual terms.
Since the second half of 2020, the Chinese economy began to recover rapidly after the coronacrisis. This contributed to an increase in demand for gold jewelry, bullion and coins from investors and the population. In January 2021, prices for yellow metal products in the country were higher than world prices. High demand for precious products and attractive prices explain the increase in gold imports to China. The consumption of precious metal in the country for the first quarter of this year almost doubled - to 288.2 tons. Demand from jewelers amounted to 169.18 tons, and from industrial and other consumers - 22.71 tons, while investment demand for bullion and coins reached 96.31 tons.
The People's Bank of China (hereinafter - NBK) controls the amount of gold entering the country through a system of quotas provided to commercial banks. Usually, the NBK gives permission to import enough precious metal to meet domestic demand. Sometimes the volume of deliveries is limited. In April 2021, the NBK allowed domestic and international banks to import large volumes of gold into the country. According to the forecast, about 150 tons of yellow metal worth $8.5 billion will be imported at current prices. Most gold is usually imported into China from Australia, South Africa and Switzerland.
The volume of imports indicates a strengthening of China's position in the global precious metal market. According to Chinese customs, since February 2020, the country has imported about 10 tons of gold each month, worth about $600 million. In 2019, imports amounted to about $3.5 billion per month, or approximately 75 tons. Demand for yellow precious metal in India has also recovered from the pandemic-induced downturn. In March 2021, a record figure was recorded - 160 tons of gold.
The low purchasing power of the Chinese population slightly affected gold quotes at the beginning of the pandemic. Western investors, fearing an economic disaster, bought a huge amount of yellow metal at that time, raising its price to a record level of $2,072.50 per ounce.
Vaccination of the population and state measures to stimulate the economy, which have been carried out for a long time, have led to a decrease in the popularity of precious metal in the eyes of investors. His quotes fell to about $1,750.
China and India typically account for about 2/5 of the world's annual gold demand. According to Suki Cooper, a precious metals analyst at Standard Chartered Bank, the recovery of the economies of the two main precious metal consuming countries is crucial to stabilizing gold quotes and should stop their further decline in the coming months.