By Ernest Hoffman
Gold demand in China is showing signs of a strong rebound even as physical flows from the UK to the U.S. continue, while there are indications that solar demand for silver may be peaking, according to precious metals analysts at Heraeus.
In their latest precious metals update, the analysts noted that Chinese wholesalers appear to be anticipating a rise in consumer demand for gold.
“Shanghai Gold Exchange (SGE) withdrawals, a key indicator of wholesale and fabrication demand, typically rise in December and January as fabricators stock up for the Chinese New Year, which fell on 29 January this year,” they noted. “Consumer demand tends to also adhere to similar seasonality. Despite a strong start to 2024, cumulative withdrawals for the full year were among the lowest on record (excluding 2020), totalling 1,450 tonnes. This comes amid ongoing contractions in China’s jewellery industry, reflected in year-on-year revenue declines among major retailers such as Richemont, Chow Tai Fook and Chow Sang Sang. However, given that December 2024 withdrawals were up 23% month-on-month, January withdrawals could still align with the historical average of 190 tonnes (based on SGE data since 2016).”
The analysts said that SGE withdrawals tend to front-run consumer demand. “The uptick in December suggests that although on a lower level than in 2024, consumer demand in China could pick up in Q1 this year,” they wrote. “However, the performance of consumer demand is somewhat contingent on how the gold price performs. So far this year, gold has risen every week, including to a new all-time high in dollar terms last week. This could temper any positive impact from the Chinese New Year gifting cycle.”
Heraeus said the flow of gold from London to the United States also continued last week. “Gold shipments have been swiftly flowing into COMEX inventories this year and are approaching 30,000 koz, the highest since August 2022,” they said. “Since 1 January, gold inventories have grown by nearly 8,000 koz, including 1,720 koz additional ounces last week, as traders and institutions have raced to beat potential tariffs in the US. As London’s vaults see outflows, this has extended waiting times, usually measured in days, to as much as a month.”
Both the Federal Reserve and the European Central Bank aligned with market expectations last week, with the former holding rates steady while the latter delivered a 25 basis point cut, while gold prices had fresh all-time highs late in the week. “However, US futures continue to trade at contango to spot gold and hit an all-time high of $2,853/oz on the March contract,” the analysts noted.
Gold prices continued their strong performance amid the ongoing tariff concerns, with spot gold reaching a new all-time high of $2,830.75 per ounce. Spot gold last traded at $2,818.00 per ounce for a gain of 0.72% on the session.
Turning to silver, Heraeus questioned whether China is capable of sustaining their torrid pace of solar growth.
“Total installed photovoltaic (PV) capacity in China reached 886.66 GW in 2024, marking a 46% year-on-year growth,” they wrote. “This addition of 277 GW exceeded industry forecasts and surpassed China’s own 2024 capacity estimate by 17 GW. However, the growth rate, while notable, fell short of 2023’s record 54% increase, and prior to that, 28% in 2021. This trend suggests that China’s peak PV capacity growth rate may have already occurred.”
The analysts noted that the last two years of growth for solar have coincided with record-low prices for PV modules driven by intense competition. “However, entering 2025, polysilicon producers (GCL and Tongwei) have agreed to limit production, while module makers (Jinko, JA Solar and Canadian Solar) have reached a minimum pricing consensus to restore profitability,” they said. “This could raise solar module prices, increasing project capital expenditure. Forecasts indicate that 232 moz of silver was used (source: The Silver Institute) in the 495 GW of PV applications in 2024 (source: PV magazine). If growth in the rate of installation is the same year-on-year, solar demand for silver could rise by another 39 moz in 2025, reaching a record 270 moz.”
Silver underperformed gold last week, though it rallied along with most precious metals. Silver prices are enjoying a strong showing to start the week, with spot silver last trading at $31.481 per ounce, an increase of 0.50% on the daily chart.
By Ernest Hoffman
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