Chinese investors remained a key force in the gold market during the second quarter of 2026, even as the metal traded in a narrow range after a sharp correction earlier in the year. Physical gold investment demand stayed robust, supported by structural factors including tax rules and a shift away from jewellery. The data, compiled by Metals Focus, shows that while quarterly volumes fell sharply from an exceptional first quarter, the underlying trend remains strong.
Q2 Demand in Context
Retail gold investment in China totalled 107 tonnes in the three months to June, a 48% decline from the all-time high of 207 tonnes recorded in Q1. Year-on-year, volumes were down 7%. However, the comparison is distorted by the first-quarter surge. On a historical basis, Q2 2026 was the third-strongest second quarter since 2010, and when the 29% year-on-year increase in the local gold price is taken into account, it was actually a record quarter in value terms.
Through the first half of 2026, Chinese retail gold investment rose 31% compared with the same period last year. Metals Focus noted that buying was concentrated in April and early May, when volumes remained healthy on an annual basis. Demand softened in the latter part of May and into June as the rangebound gold price dampened sentiment, prompting some investors to rotate into domestic AI-related equities.
Gold exchange-traded funds (ETFs) also reflected strong interest. Despite a large outflow in June, Chinese ETFs added 29 tonnes of gold in the first half of the year, the second-strongest start to a year on record. Total assets under management edged up 1%. Meanwhile, Gold Accumulation Plans (GAPs) offered by commercial banks held up well, with only a moderate slowdown in Q2.
The Role of VAT Rules
Changes to China’s Value Added Tax regime, introduced in November 2025, have reshaped the precious metals market. Under the new rules, gold bars and coins sold by Shanghai Gold Exchange (SGE) member companies remain exempt from VAT. Silver and platinum bars and coins, along with gold investment products sold by non-SGE members, are subject to a 13% VAT on their full value.
This policy initially drove a surge in silver bar sales in late 2025 and early 2026, as non-SGE members shifted their focus to silver to avoid the tax disadvantage. Silver’s rally to record highs and its lower unit price attracted investors priced out of gold. However, when silver prices fell earlier this year, many suppliers switched back to gold. Online stores and retailers now act as sales agents for SGE-member companies, earning commissions on gold bar sales, while manufacturers produce bars under a processing model that charges only labour costs.
The VAT rules have also diverted demand from jewellery to bars. Consumers now effectively pay an additional 7% VAT on gold jewellery, which has hit heavy, plain 24K pieces typically sold by weight with low labour charges. As a result, Q2 2026 was the third consecutive quarter in which retail investment exceeded jewellery consumption.
Outlook for H2 2026
Metals Focus expects Chinese gold demand growth to continue in the second half of the year, albeit at a slower pace. The forecast is for a 20% year-on-year increase in full-year retail investment to around 500 tonnes. The deceleration partly reflects the high base set in 2025. Supporting factors include gold’s safe-haven appeal, a constructive price outlook, the People’s Bank of China’s ongoing gold reserve accumulation, and the structural shift away from quasi-investment jewellery. Investors can track the latest movements on the live gold price page.
Key takeaways
- Chinese retail gold investment was 107 tonnes in Q2 2026, down 48% quarter-on-quarter but the third-highest Q2 since 2010.
- When adjusted for a 29% rise in the local gold price, Q2 set a new record in value terms.
- VAT rules introduced in November 2025 continue to favour gold bars over silver and jewellery, reshaping demand patterns.
- Metals Focus forecasts full-year 2026 retail gold investment of around 500 tonnes, a 20% increase year-on-year.
Common questions
Why did Chinese gold investment drop in Q2 compared with Q1?
Q1 2026 saw an all-time high of 207 tonnes, partly driven by the price correction and strong safe-haven buying. The subsequent decline was largely a normalisation. In historical context, Q2 volumes were still very strong, and in value terms they set a record.
How have VAT rules affected the Chinese gold market?
Gold bars and coins sold by SGE members remain VAT-free, while silver and platinum products, as well as gold from non-SGE members, are subject to 13% VAT. This has encouraged a shift from silver back to gold and from jewellery to investment bars.
What is the outlook for Chinese gold demand in the second half of 2026?
Metals Focus expects a 20% year-on-year increase in retail investment to around 500 tonnes for the full year. Growth is likely to moderate in H2 due to a high base, but structural support from safe-haven demand, PBoC buying, and tax incentives should sustain momentum.
Chinese investors have proven resilient in a period of sideways gold prices, underpinned by policy and a long-term preference for physical metal. The second quarter data confirms that, while quarterly figures may fluctuate, the underlying appetite for gold in China remains strong.