With global gold prices hitting historic highs 20 times in the first quarter, China's investment demand for the precious metal has surged, positioning the country as a pivotal force driving global gold investment growth, said the World Gold Council on Wednesday.

As of Thursday, the price of gold was around 765 yuan ($105) per gram.

Ray Jia, research head of the council's China arm, attributed the soaring investment demand to the record-shattering gold price rally, escalating trade tensions and the underperformance of other assets. Expected currency depreciation also drove demand for gold as a safe haven, he said.

"We expect gold investment demand to stay robust in the second quarter as trade tensions, worries about global economic growth and expectations of central bank rate cuts persist, further bolstering its allure for investors, Jia said. "Looking ahead, gold prices are poised to remain a key driver of gold investment. Should the upward momentum continue, a rise in gold prices could attract more buyers, with any short-term corrections potentially viewed as buying opportunities."

According to the council's data, inflows of gold exchange-traded funds in the Chinese market hit a record high in the first quarter, at around 16.7 billion yuan, equivalent to 23 metric tons of physical gold.

The soaring prices and unprecedented inflows have propelled both the total assets under management and total holdings of gold exchange-traded funds to break historical records, reaching highs of 101 billion yuan and 138 tons, respectively.

Another major part of gold investment — gold bars and coins — also saw surging demand in China in the first quarter to stand at 124 tons, a growth of 12 percent year-on-year and 48 percent quarter-on-quarter — its second strongest quarter on record.

The World Gold Council said this performance was particularly impressive given the year-on-year growth is built on an already-strong Q1 performance in 2024. In volume terms, the council said China was by far the largest contributor to the global year-on-year rise, accounting for 38 percent of total first-quarter bar and coin investment.

As investor attention was drawn toward pure gold investment products, gold jewelry demand saw a sharp decline in China. The council said the demand of 125 tons marked a five-year low for the first quarter — traditionally the seasonal high point for China's gold jewelry market — 19 percent below the 10-year quarterly average. It said demand in value terms was more resilient, down just 6 percent year-on-year at $12 billion.

"An increasing number of consumers in China preferred lighter weight, more affordable items," said Wang Lixin, regional CEO of the China branch of the World Gold Council, adding a reason might be given for the soaring gold prices, customers are reluctant to spend more on craftsmanship costs for their accessories.

Liu Yan, vice-president of Yuyuan Jewelry and Fashion Group, the parent company of renowned gold brand Lao Miao, said high gold prices have led some consumers either to delay purchases until there is a price pullback or choose lower-weight gold jewelry.

Deng Ronghua, general manager of Chow Tai King Jewelry, said: "In the past, sales were primarily driven by larger gold jewelry items, whereas currently, lighter products are outperforming, with customers typically spending between 2,000 and 3,000 yuan on average. Moreover, businesses engaged in gold recycling have achieved favorable outcomes."

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