Gold News

China Gold Price Hits 7th New Record in 10 Days as SSE Earnings Slump

CHINA GOLD prices set a fresh all-time high on Tuesday, the 7th new record in 10 trading days, but Dollar quotes for London bullion dropped near 3-week lows as financial traders bet that the Federal Reserve will keep US interest rates higher for longer while the Chinese authorities struggle with a deepening economic slowdown.
The world's 2nd largest economy, as well as the No.1 gold consumer and central-bank buyer, China saw the gold price in Shanghai fix at ¥468.62 per gram this afternoon.
That's more than 2.9% higher from this time last month, when the People's Bank made a surprise cut to Chinese interest rates as the country's economic data worsened amid the real-estate sector's ongoing debt repayment troubles.
With the Yuan edging back from Monday's sudden rally on the FX market, today's new record China gold price put Shanghai's Dollar-equivalent rate at $1999 per Troy ounce, a record $79 above global quotes for London settlement.
Known as the 'Shanghai premium' – an incentive for new imports of bullion, out of the precious metal's key trading and storage hub and into its No.1 consumer nation – this gap between London and China prices has averaged $6.50 per ounce over the last 3 years.
Chart of Shanghai Gold Exchange's PM benchmark price (right, Yuan per gram) vs. London quotes (US Dollars per ounce, left). Source:BullionVault
Rising this August above $50 per ounce for the 1st time since the Shanghai Gold Exchange in 2016 launched its official twice-daily benchmark auctions, the premium has never before reached today's level on 20 years of spot-market data collated and published by the mining industry's World Gold Council.
As the Shanghai gold price rose 0.6% from the all-time high set just 1 week ago, the Shanghai and Shenzhen stock market today saw its recent rally stall, slipping back after rebounding 2.4% from late-August's new 2023 lows on the SSE Composite share index.
"The bulk of the selling pressure [in Chinese equities] has passed its strongest point," reckons Asian brokerage CLSA, "because most [investors] are already underweight."
But after the 5,000 companies traded on the SSE saw their corporate profits drop 9.6% per year on average between April and June, according to Haitong Securities, more than 75% of them have now cut their full-year 2023 outlook further, says analysis from Bank of America.
Gold traded in London meantime fell sharply Tuesday afternoon, dropping towards 3-week lows beneath $1910 per Troy ounce as the Dollar resumed its 3-month long uptrend against the rest of the world's major currencies.
Having forecast a year-end Fed Funds rate of 5.0% at the start of June, trading in CME derivatives now sees no cut from today's ceiling of 5.5% until the middle of 2024.
The UK gold price in Pounds per ounce dropped only £10 to £1530 as UK interest-rate forecasts fell back after the strongest rise in average UK wage data on modern records – and the first real terms annual average pay rise in almost 2 years – was skewed by one-off public-sector pay awards.
Euro gold fell harder, touching 2-week lows close to €1781 per ounce, despite economic sentiment across the 20-nation currency area worsening in September on the ZEW survey, while consumer-price inflation in the region's 4th largest economy Spain showed a 3-month high of 2.6% per year for August.
US consumer-price inflation for August, due for release Wednesday, is expected to show a rise to 3-month highs of 3.6% per year.
The European Central Bank is expected to keep its overnight deposit rate at 3.75% per year.
Back in China, giant property developer Country Garden today got creditor approval to delay 6 bond repayments by 3 years, the South China Morning Post reports, allowing the "debt-saddled developer to breathe again" after it won a delay on repaying overseas debts last week.
Last month's small retreat in Chinese gold prices – buoyed by the central bank restricting supply by issuing fewer gold import licenses and so driving the Shanghai premium to these new record levels – meant that "deferred purchases from Q2 and robust gifting demand around Chinese Valentine's Day...fuelled gold jewellery consumption," says a note from bullion-market analysts Metals Focus.
With the consultancy expecting lower gold prices towards the end of 2023, "The chief upside risk centres on how lower gold prices stimulate bargain hunting for jewellery," Metals Focus says, "especially those with quasi-investment qualities.
"On the downside, the lacklustre Chinese economy and deteriorating consumer sentiment may further undermine domestic sales."

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver, platinum and palladium market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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