The Chinese gold ETF market recorded significant inflows in the first half of the year, even with a June outflow, according to data from the World Gold Council. This drove total assets under management (AUM) to a slight increase, reaching RMB 243 billion, while total holdings grew by 29 tonnes to 277 tonnes.
Upstream physical gold demand rebounded month-on-month in June, but the total for the first half remained notably below the ten-year average. The People's Bank of China added 15 tonnes to its gold reserves in June, marking the largest single-month purchase since October 2023. Over the first half of the year, China's official gold reserves accumulated an increase of 40 tonnes.
As the second half of the year begins, with gold prices stabilizing, the outflow scale from Chinese gold ETFs has narrowed significantly. However, weak trading volumes for Au9999 and subdued gold price premiums both domestically and internationally indicate physical gold demand remained soft in early July.
Gold Price Decline in June Erases First-Half Gains
In June, both the US dollar-denominated London Bullion Market Association (LBMA) afternoon gold price and the RMB-denominated Shanghai Benchmark Gold Price (SHAUPM) fell by 11%. This decline was primarily driven by rising opportunity costs and cooling trend momentum. Market interpretation of comments by the new Federal Reserve Chair, Kevin Warsh, at the June monetary policy meeting as hawkish pushed up US Treasury real yields and the US dollar, leading investors to reduce gold ETF holdings and shift options positions to a more bearish stance.
The June price weakness reversed earlier gains, resulting in a negative performance for gold in the first half. As detailed in the "2026 Global Gold Market Mid-Year Outlook," gold prices experienced a roller-coaster ride in H1, with various risks, shifts in investor positioning, and rising opportunity costs being the main drivers behind this intense volatility. The international gold price in US dollars fell by 8%, while the RMB gold price dropped by 10%. The strengthening of the RMB against the US dollar amplified the weakness in the RMB gold price, marking the first semi-annual decline for gold since 2021.
Chinese Gold ETFs See Significant H1 Inflows Despite June Outflow
Chinese gold ETFs experienced an outflow of RMB 15 billion in June, their weakest single-month performance on record. Total gold ETF AUM fell by 16% to RMB 243 billion, the lowest level since December 2025, with total holdings decreasing by 17 tonnes to 277 tonnes. Key influencing factors included weaker gold prices dampening domestic investor interest in gold allocation, and surging investor enthusiasm for the stock market, with new account openings continuing to rise sharply in June, diverting market attention away from gold.
The weak June performance narrowed year-to-date inflows to RMB 40 billion. Despite this, it remained the second-strongest first-half performance on record. Cumulative demand for Chinese gold ETFs in the first half reached 29 tonnes, with total AUM edging up by 1%. Supporting factors included robust demand for gold ETFs against a backdrop of heightened geopolitical and economic uncertainty, continued support for market sentiment from the PBOC's persistent gold purchase announcements, and increased participation from institutional investors in Chinese gold ETFs, providing further demand support.
Shanghai Futures Exchange Gold Trading Volume Remains High While Open Interest Declines
The average daily trading volume for gold futures on the Shanghai Futures Exchange (SHFE) in June was 305 tonnes, a slight increase of 4 tonnes month-on-month. Although this was below the 2025 average of 457 tonnes, it remained significantly higher than the five-year average of 265 tonnes. SHFE gold futures open interest stood at 274 tonnes at month-end, down 8% month-on-month and 13% lower than the level at the end of 2025.
For the first half of the year, the average daily trading volume for SHFE gold futures was 386 tonnes. The primary supports for maintaining this high trading volume were increased gold price volatility and rising hedging demand from market participants.
First-Half Upstream Physical Gold Demand Rebounds
Gold withdrawals from the Shanghai Gold Exchange (SGE) in June totaled 87 tonnes, a 36% increase month-on-month. This rebound was driven by opportunistic restocking across the supply chain following the gold price drop, continued robust investment demand for bars and coins from retail investors buying on dips, and an extremely low base from the previous month—May had recorded the weakest performance in 16 years.
Despite this rebound, June's upstream physical gold demand remained near the lower end of its range over the past decade, against a backdrop of persistently weak gold jewelry demand.
In the first half, market participants withdrew 598 tonnes of gold from the SGE, down 12% year-on-year and 27% below the ten-year average. While physical gold investment demand remained strong, continued weakness in jewelry consumption led manufacturers and retailers to remain cautious in restocking, weighing on overall upstream physical gold demand.
People's Bank of China Continues Gold Purchasing Trend
The PBOC increased its official gold reserves by 15 tonnes in June, marking the 20th consecutive month of purchases and setting a new record for the longest continuous accumulation cycle. This raised official gold reserves to 2,346 tonnes, accounting for 8% of total foreign exchange reserve assets.
Despite gold price volatility, the PBOC continued its purchases throughout the first half, accumulating a total increase of 40 tonnes in its official reserves. Over the past 20 months, total purchases have reached 82 tonnes. During this period, escalating global geopolitical tensions, tightening trade controls, and increased financial market volatility have further highlighted gold's strategic advantages as a safe, stable, and credit-risk-free asset. As indicated in the "2026 Central Bank Gold Reserves Survey," these attributes of gold are the most valued factors for central banks.
Gold Imports Slightly Lower in May
China's gold imports in May were 151 tonnes, down 6 tonnes month-on-month.
Outlook for the Future
During the traditional off-season for gold jewelry consumption, demand is expected to remain soft, though stabilizing gold prices may provide some support. Meanwhile, investment demand will continue to depend on the trajectory of gold prices and the performance of the domestic stock market.
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