According to published data, the demand for gold in China has started decreasing in late 2019. The coronavirus outbreak can lead to an even stronger fall in the demand for the precious metal, while other countries are actively buying gold.
China is the world's top producer and consumer of gold, and has been so for many years. We can easily conclude that the emergence of the coronavirus has had a strong impact on the internal gold market.
In December 2019, shortly before the Lunar New Year, China imported a record 150 tons of gold, since dealers counted on strong sales during the holiday season, as reported by Capital Economics. However, it's currently clear that the epidemic has strongly hit the internal gold market. This is partly because the business activity in China was paralyzed due to the extended holidays.
According to analysts quoted by Kitco News, the Chinese demand for gold can drop by 10% in 2020. It should be reminded that in 2019, the demand fell by 31%, all the way to 211 tons (as reported by the World Gold Council or WGC). The gold jewelry demand decreased by 7% to 637.3 tons. However, these events did not impact the global gold price. On the contrary - the price in euro grew by 22%.
While the demand in China is plummeting because of the virus outbreak, in other countries it has reached a feverish pitch as the global uncertainty is increasing. The WGC reports that the demand for gold ETFs in January 2020 led to a 61.7 tons increase in their reserves, which is a new monthly record. These ETFs are backed by physical gold, and total ETF reserves are estimated at 2,947 tons of gold.
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