China’s gold market saw a stark divergence in May, with retail investment and wholesale physical demand slumping to multi-year lows even as the nation’s central bank accelerated its bullion purchases to the fastest pace in five months, according to a monthly report from the World Gold Council.
Gold prices retreated across both international and domestic markets last month. The LBMA Gold Price PM declined 1.4%, while the Shanghai Gold Benchmark Price PM (SHAUPM) fell 2.7%, as a stronger renminbi amplified the drop in local gold prices. Ray Jia, head of China research at the WGC, pointed to geopolitical uncertainties in the Middle East and related inflation concerns as key drivers for the month, which pushed bond yields and the US dollar higher.
The cooling in private investment demand was most pronounced in exchange-traded funds. Chinese gold ETFs posted their first monthly net outflows since August 2025, snapping an eight-month streak of consecutive inflows, with total outflows reaching $1.2 billion in May. Combined with the price decline, the pullback dragged total assets under management down 5% to 289 billion yuan ($43 billion). Collective ETF holdings fell 8.3 tonnes to 293 tonnes by the end of the month.
Jia attributed the outflows to a sustained rally in China’s domestic equity market that diverted capital away from gold, paired with a lack of clear directional trend in gold prices that prompted some investors to liquidate their ETF positions.
Wholesale physical demand also tumbled sharply to a decade-low for the month. Gold withdrawals from the Shanghai Gold Exchange — a widely followed proxy for wholesale demand — totalled 64 tonnes in May, down 38% month-on-month and 36% year-on-year. That marks the weakest May reading since 2010.
But China’s Central Bank Is Loading Up
In stark contrast to softening private-sector demand, the People’s Bank of China stepped up its gold buying to take advantage of lower prices.
The PBOC delivered its 19th consecutive monthly increase in official gold reserves in May, adding 10 tonnes to bring total holdings to 2,332 tonnes. It was the strongest month of official-sector purchases since December 2024. Year-to-date, the central bank has accumulated 25 tonnes of gold, with bullion now accounting for 8.9% of China’s total foreign exchange reserves. Over the full 19-month buying streak, official holdings have risen by a combined 67 tonnes.
Imports also remained robust on the back of domestic price premiums. The latest customs data showed China’s net gold imports reached 157 tonnes in April, up 10% from March and 40% from a year earlier — the highest monthly level since March 2024. The positive local gold price spread remained the core driver supporting import activity.