Gold bars and coins are selling well, but is gold jewelry losing its appeal? On May 9, according to the latest release from the China Gold Association, due to the high and volatile international gold price, domestic gold jewelry consumption remained under pressure in the first quarter, with demand continuing to decline. Meanwhile, investment demand for gold is strong, with gold bars and coins becoming popular investment products. Sales of gold bars through bank channels saw significant growth.
Specifically, in the first quarter of 2026, China's total gold consumption was 303.292 tons, a year-on-year increase of 4.41%. Within this total, gold jewelry consumption was 84.62 tons, a sharp year-on-year decrease of 37.1%; consumption of gold bars and coins was 202.062 tons, a significant year-on-year increase of 46.4%; industrial and other uses accounted for 16.61 tons, a year-on-year decrease of 7.43%.
Regarding international gold prices, Wind data shows that in Q1 2026, spot gold prices were volatile, reaching a high near $5600 per ounce and a low of $4098 per ounce, with a range amplitude as high as 34.75%, yet still posting a cumulative gain of about 8%.
Domestically, the latest quoted prices for gold jewelry from several major brands are around 1432 to 1438 yuan per gram. Among them,
Global Gold Demand Surges Global Central Banks Added 244 Tons of Gold in Q1 According to the World Gold Council's Q1 2026 "Global Gold Demand Trends Report," total global gold demand (including over-the-counter transactions) was 1231 tons, a 2% year-on-year increase. In value terms, total gold demand reached $193 billion, a substantial 74% year-on-year increase.
Breaking down the structure of gold demand, global investment demand in Q1 was 536 tons, a slight 5% year-on-year decrease, primarily dragged down by jewelry demand. Global demand for gold bars and coins totaled 474 tons, while global gold ETFs saw a net inflow of 62 tons. Global jewelry consumption totaled 300 tons; while the volume of gold consumption decreased, the consumption value rose significantly. Global central banks were net purchasers of 244 tons of gold, with purchases above the five-year average. Although central banks of some countries, such as Turkey, reduced their gold holdings for various reasons, global central banks overall still added 244 tons of gold in the quarter. Finally, gold demand from the technology sector was 82 tons in Q1, showing little change.
Furthermore, stablecoin companies are gradually becoming important marginal buyers of gold. According to Tether's Q1 report, Tether purchased approximately 6 tons of gold in the first quarter. As of the end of March this year, Tether's total gold holdings were about 132 tons. Tether is a stablecoin pegged to the US dollar. On one hand, increasing gold holdings helps maintain the stability of the Tether coin's value to uphold the 1 USDT = 1 USD equivalence principle. As a globally recognized reserve asset, gold can back cryptocurrency assets. On the other hand, while Tether also invests in US Treasuries and the US dollar, gold is an asset with no credit risk concerns and excellent liquidity, making it a sound choice for stablecoin companies to increase holdings. Additionally, stablecoin companies are increasing gold holdings for portfolio diversification needs. As the issuance of global stablecoins increases in the future, corresponding gold demand is also expected to rise. Private digital currencies may become significant competitors to central bank gold reserves in the future.
Two Major Factors Influencing Gold Prices Looking ahead, the main factors influencing gold price trends are as follows:
First, the Federal Reserve faces a combination of rising inflation and a delicately balanced labor market. Even with a leadership change, the Fed still encounters resistance to cutting interest rates. However, if the US economy experiences "inflation without stagnation," it could provide support for gold. The March Fed Summary of Economic Projections (SEP) shows that Fed officials anticipate a 25 basis point rate cut in 2026 and another 25 basis point cut in 2027, with the federal funds rate expected to maintain a long-term target around 3.1% after 2028.
Following conflicts in the Middle East, international crude oil prices have risen sharply, significantly boosting US inflation. Data from the US Bureau of Economic Analysis (BEA) shows the Personal Consumption Expenditures (PCE) Price Index rose 3.5% year-on-year in March, a substantial 0.7 percentage point increase from the previous 2.8%, marking the largest increase since June 2022. The core PCE Price Index, excluding food and energy, rose 3.2% year-on-year in March, the highest level since November 2023. Additionally, according to US Labor Department data, the US Consumer Price Index (CPI) rose 3.3% year-on-year in March, the largest increase since May 2024, with the March year-on-year CPI growth rate significantly higher than the previous 2.4%. Inflation indicators suggest the US faces considerable inflationary pressure, and oil price-driven inflation from the current Middle East situation has not yet peaked.
Regarding employment, March 2026 ADP data shows the US private sector added 62,000 jobs, exceeding market expectations of 40,000 and roughly flat with February's 63,000. US Labor Department data shows non-farm payrolls increased by 186,000 in March, with the previous figure revised to a decrease of 133,000, against expectations of a 78,000 increase. The March unemployment rate was 4.3%, slightly higher than the previous 4.4%, indicating the US labor market is in a state of basic balance.
The above data suggests a high threshold for the Federal Reserve to cut interest rates. Furthermore, US GDP grew at an annualized quarter-on-quarter rate of 2% in Q1 2026, higher than the previous 0.5%; the corresponding year-on-year GDP growth was 2.7%, higher than the previous 2.0%, indicating some resilience in the US economy. Therefore, if the US faces an economy with "inflation without stagnation," gold's function as an inflation hedge could provide support.
Second, the Federal Reserve is set for a leadership change in May. Current Fed Chair Jerome Powell has indicated he will remain on the Board of Governors, though the timing is uncertain, meaning the previous Fed model and Powell's influence may persist for some time. Given current US conditions, incoming Fed Chair Kevin Warsh may face challenges in implementing policies for balance sheet reduction and interest rate cuts. Rate cuts are a "political mission" during Warsh's tenure, yet all current US inflation indicators show significant inflationary pressure remains. Warsh mentioned "trimmed-mean inflation" during Senate hearings, and he may pursue inflation framework reform upon taking office, though modifying and implementing such a framework takes time. Secondly, Warsh believes reducing the Fed's balance sheet will create room for more substantial policy rate cuts. In practice, unless scarce reserve conditions are met, the Fed may find it difficult to avoid shifting from balance sheet reduction back to expansion. Overall, even if balance sheet reduction is initiated later, the Fed is likely to proceed slowly, and related supporting reforms will also require time.
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