China’s gold market showed a split personality in November: the Shanghai Gold Exchange recorded a 32% m/m drop in wholesale withdrawals to 84t, eroding jewellery channel demand, while investors pushed RMB16bn into Chinese gold ETFs and the People’s Bank of China continued its steady accumulation.
- LBMA Gold PM (USD): +4.5% in Nov, +61% y‑t‑d
- SGE withdrawals (wholesale): 84t, -32% m/m, -15% y/y (Nov 2025)
- Chinese gold ETFs: RMB16bn inflows (US$2.2bn, ~17t); AUM RMB231bn, holdings 244t
- PBoC holdings: 2,305t (added 0.9t in Nov); gold = 8.3% of FX reserves
Market drivers and the VAT inflection
The immediate trigger for the November softness was the recent VAT reform. By increasing the tax burden on gold jewellery, the reform has introduced a pronounced drag on the retail pipeline: higher production and retail costs, muted consumer footfall and reduced restocking by retailers. The result is an unseasonal November low for SGE withdrawals — the weakest November since 2009 — despite healthy demand elsewhere in the system.
Investment flows vs. jewellery demand
Investment appetite retained substantial heft. Chinese ETFs recorded their third consecutive monthly inflow, lifting month‑end holdings to fresh records. Bullion channels that are outside the VAT scope remained buoyant, suggesting that many purchasers who previously bought jewellery for investment motives have shifted to bars, coins and ETF wrappers. Meanwhile, the LBMA and Shanghai benchmark prices continued their ascent, supported by growing odds of U.S. rate cuts and safe‑haven demand.
Macro positioning — central bank and futures
The PBoC’s marginal acquisition (0.9t in November) extends a 13‑month buying streak. That steady accumulation has a tactile effect on market psychology: a persistent, if modest, central‑bank bid that adds substantial heft to strategic demand. Futures activity cooled as price volatility fell — daily average SHFE volumes declined from very elevated 2025 levels but remain above the 2024 average.
Context: how this fits 2025 trends
Three 2025 themes converge here. First, regulatory shifts and tax reform are forcing consolidation in traditional retail channels; firms with weak balance sheets or limited product differentiation are under pressure. Second, the migration from taxed jewellery to investment vehicles is strengthening the case for ETF and bullion distribution channels. Third, macro drivers — the prospect of Fed easing, geopolitical tension and local equity retracements — continue to underpin demand for gold as a portfolio ballast.
What this means for U.S. retailers and investors
For U.S. retailers: expect knock‑on effects in sourcing and pricing. A leaner Chinese jewellery sector implies fewer large‑volume orders from some OEM partners and potential upward pressure on finished‑goods premia as supplier margins adjust. Consider tightening inventory turns, intensifying product differentiation (design, finish, service) and strengthening direct bullion or bridal‑grade supply agreements to offset channel displacement.
For investors and U.S. wholesalers: the bifurcation between jewellery demand and investment flows creates tactical opportunities. ETF and bullion demand in China is acting as a structural bid beneath the market — an important consideration for position sizing and timing around expected Fed moves. Central‑bank accumulation, even at a modest monthly pace, signals strategic intent that supports medium‑term price discovery.
Takeaway
November exposed a clear separation: consumption‑facing jewellery channels are reacting to tax reform, while investment channels — ETFs, bullion and official reserves — continue to absorb supply with discernible force. For market participants, the practical response is to recognise the shifting distribution of demand and align sourcing, inventory strategy and risk sizing accordingly.
Image: Shanghai benchmark prices and SGE flows. Source: World Gold Council.
More by Ray Jia
Image Referance: https://www.gold.org/goldhub/gold-focus/2025/12/china-gold-market-update-november-demand-feels-vat-reform