Chinese demand for gold has declined in the second quarter of 2019 due to the rising confidence of investors in the renminbi’s exchange rate and the steady performance of the domestic stock market, China Daily reported.

The World Gold Council said continued purchases by central banks in the world during Q2  meant global demand for the yellow metal rose by 1,123 metric tons, a rise of 8% year-on-year.

For investors, the demand for gold in China has seen some softening. Part of the reason behind this trend is that investors have become less worried about foreign exchange rates while the price of gold has increased significantly, especially in June. The demand for gold bars and coins has also declined by 29% year-on-year, the report said.

“In the past months, the exchange rate of the renminbi has become stable, and the domestic stock market was also healthy, which led many investors to turn to investments with higher returns,” said Wang Lixin, managing director of the World Gold Council in China.

“The rapid increase in the price of gold also contributed to the declining demand in China.”

Gold is a traditional safe-haven metal for investors, especially during times of turbulence in stock and financial markets.

Bao Jigang, chairman of Wukong Investment, a Shenzhen-based private equity firm, said gold is still the first choice for those trying to hedge their risks, the report said.

“Since the end of 2018, our company has used gold investments to hedge its risks to counter the complicated international environment in order to balance its investment structure,” he said.

Separately, China has also increased its gold reserves by 74 metric tons in the first six months of the year, the council said.

“The notable increase in Chinese gold reserves made the biggest contribution to Chinese gold demand in the second quarter of 2019,” said Wang.

On the consumption side, the demand for gold jewelry in the second quarter of 2019 fell by nearly 4% year-on-year to 137.8 metric tons, the third consecutive quarter it has dropped..

“If gold prices continue to rise rapidly in the short term, it may curb gold consumption and investment demand,” he said.

He added that as the shopping habits of the 90s generation (the urban generation born in China between 1990 and 1999) changed, the retail gold jewelry industry has been facing challenges in attracting consumers.

“Nowadays, the younger generation don’t even go to brick-and-mortar shops anymore,” he said. “They can’t reach the consumers.”