China ranks as the world’s biggest gold market.

While the price of gold declined in dollar terms last month, it was up 1.8% in yuan due to Chinese currency weakness.

With prices rising, gold has outperformed most other assets in China, according to data from the World Gold Council.

Gold withdrawals from the Shanghai Gold Exchange (SGE) totaled 161 tons last month, reflecting strong wholesale demand for gold. This represented a 46-ton month-on-month increase.

Year-on-year, withdrawals from the SGE were down a modest 5 tons. According to the World Gold Council, this was “mainly due to 2022’s distorted seasonality amid COVID-related restrictions and a lower local gold price.”

Chinese Valentine’s Day and various jewelry fairs are scheduled in September. This will likely boost retail demand this month.

Also reflecting strong domestic gold demand, the Shanghai-London gold price spread averaged $40/oz in August, a new record high. This was a $23 per ounce month-on-month increase.