The Physical Gold Market in China: A Perspective on the Chinese New Year


The Chinese New Year is fast approaching and with it comes the promise of a fresh start and new beginnings. 2023 is the year of RABBIT. The moon is represented by rabbits in Chinese culture.

During the Chinese New Year (CNY), China’s gold demand often spikes due to gifts and red envelopes. The physical gold market sees a lull during this time of the year. It usually falls between January 21st and February 21st – the exact data varies from year to year as it is set according to the Lunar calendar. This year is especially significant for the Chinese gold market as it marks the start of a new 12-year cycle with 12 animals of the Zodiac (Sheng Xiao), with each year in the cycle represented by a different animal. The last time we saw a new cycle begin was in 2009, which proved incredibly bullish for gold. So, what does the Chinese New Year 2023 have in store for the precious metal?

Why ‘Gold’ as a gift?

  •   Gold has long been associated with luck or fortune, which is significant as many anticipate what the new year will bring.
  •   Chinese consumers’ purchasing power typically reaches its peak just before Lunar New Year, driven by year-end bonuses.
  •   China rushes to purchase gold coins and bars, especially for gifts on a Lunar New Year theme, or a Zodiac animal theme.
  •   Additionally, there is the CNY tradition of giving gifts. Typically, seniors give red envelopes to juniors that are filled with cash or other valuable gifts like gold.
  •   There is a more emotional attachment to gold in China than globally.
  •   New Year’s Day in China also marks the beginning of the Spring Festival. The busiest time of year for buying gold is frequently during this time of year when more people buy products made of gold to wish themselves and others luck. In the first week of February 2021, gold jewelry consumption in Shanghai reached 1.1 billion yuan.

Gold coins as gift

  •   Pure Gold Coin – Lunar Year of the Rabbit in Canada
  •   The 8 Maple Leaf gold coins included in the Royal Canadian Mint’s “Maple Gram 8” set are presented inside a lovely red and gold display card with a Chinese New Year theme. The eight gold Maple Leaf coins each weigh one gram and are made of 9999 fine gold.

An examination of the effects of the seasons

  •   In the land of the dragon, it is customary to purchase and give precious metals for the Chinese New Year. Therefore, historically speaking, December and January have been better months for retailers. In January, the Chinese economy showed more signs of stability.
  •   Today, gold is regarded as a sign of prosperity, an ornament, a currency, and an integral part of Chinese religion. One of the 2019 global consumer research findings, shows that higher incomes are associated with higher gold consumption.
  •   China’s demand for gold jewellery increased to 675 tonnes in 2021, 6% more than in 2019.
  •   In the weeks leading up to the Chinese New Year, the Shanghai premium over global reference pricing tends to rise as expected given the increased demand for gold in China. In 2016, 2013, and 2010, this effect was particularly strong, and it seems to occur every year.

Economic trends of late

Average Data

The National Bureau of Statistics reports that over the past 20 years, December has consistently been the month with the highest monthly retail gold sales.

The reasoning is straightforward: as supply becomes more constrained due to increased demand, local gold prices rise. The local gold premium has, on average, been 65% higher during the six weeks leading up to CNY than the annual mean over the previous ten years.

Retail trade revenue of gold, silver, and jewelry in China from August 2021 to August 2022

Sum Up:

China’s gold consumption increased 56% year over year in 2021, marking a significant upturn from 2020. And in 2023, Chinese demand for gold will probably still be very high. On the first day of the Chinese New Year, the Shanghai Gold Exchange will hold a special auction for gold bars weighing between 1 gram and 1,000 grams. The price will be based on the closing price of the previous trading day. This is an opportunity for investors to buy gold at a discount. The discount will be between 5% and 10%. The Year of the Rabbit is also considered to be a lucky year for the gold market.