China's Gold Price "Impact & Importance" to Grow
Thursday, 12/19/2013 17:53
China's gold investment and jewelry buyers set to stop being "price takers"...
CHINA'S influence over the world gold price is set to grow, according to a leading analyst, as the world's top jewelry retailer says sales have defied the 2013 slowdown in the emerging Asian's rate of economic growth.
Speaking this month at the 8th annual China Gold Summit 2013 in Shanghai, Philip Klapwijk of Precious Metals Insights, formerly head of Thomson Reuters GFMS, said China's "impact on gold price formation and activity is growing all the time."
"Moreover, emerging markets – and especially China – have a growing impact on 'paper markets' for gold, both through trading on domestic exchanges (for instance the Shanghai Gold Exchange and the Shanghai Futures Exchange) and also indirectly via the loco-London market."
Many commentators have been puzzled how demand from China, now the world's No.1 consumer market for gold, could have leapt this year without stemming the 25% slide in gold prices.
But while the trend is changing, says Klapwijk, and while the physical bullion market is
also "shifting East" alongside global jewelry demand, "such Asian demand tends to be 'reactive' and a 'price taker'," rather than setting prices worldwide.
"There's no doubt," agrees gold-mining fund manager Evy Hambro of Blackrock, "that the liquidation of [Western] gold ETF holdings in the first part of the year
really set the tone."
"I think the quantum that's come out of there is the big number," he told the
Financial Times earlier this week, "and we'll drift a little lower next year.
But for the gold price, Hambro adds, that outflow from Western investment holdings "is battling against the upsurge in physical buying" in Asia.
For China's jewelry sales meantime, "Even though the economic growth in China is slowing down," said Kent Wong, managing director of the Hong Kong-listed Chow Tai Fook, the world's largest jewelry store chain, to CNBC on Wednesday, "people are still willing to
spend money" and buy gold.
With 1,800 stores across China, "we have already
adjusted our strategy to create some new designs at an affordable price," Wong explained.
China gold prices have fallen 27% in 2013.
Chow Tai Fook's revenue is twice that of US retailer Tiffany & Co. "It is my dream that one day we can become a global jeweler," says Wong.
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