Gold News

Gold Bars Demand in China Jumps as Yuan Falls, No.1 Miner for 10th Year

GOLD BARS traded in London's wholesale market dropped near $1200 per ounce on Wednesday, retreating 1.5% from Monday's new 9-week highs even as the US Dollar fell hard on the forex market while world equity indexes rose sharply.

Hitting new 10-week lows against the Chinese Yuan, the Dollar held firm versus the Euro but hit fresh 1-month lows against the "commodity currencies" of New Zealand and Australia.

The British Pound rose to its highest level since mid-December at $1.26 – pushing the price of wholesale gold bars down to 2-week lows beneath £960 per ounce for UK investors.

As this weekend's start to the Chinese New Year holidays approached, Shanghai premiums for wholesale gold bars slipped below $9 per ounce versus London quotes, the smallest incentive to new imports since early November.

"The international influence of China's gold industry is growing," says Song Xin, President of the China Gold Association, in an address to CGA members urging them to "deepen the reform of last year [with] the five development concepts of 'innovation, coordination, environmental care, openness and sharing' put forward by [Communist Party] General Secretary Xi Jinping" in the coming Year of the Rooster.

China's gold mining output has now led the world for 10 consecutive years while its gold consumption has led for 4 years, says Song, citing new data published by the CGA on Wednesday.

Demand for gold jewelry sank 19% last year to 611 tonnes on the CGA's figures, but investment in gold bars and coins rose 29% to almost 289 tonnes.

Despite an overall drop of 7%, that most likely helped China's total household purchases outstrip India for the 4th year running, accounting for perhaps 1 ounce in every 4 sold worldwide.

The Yuan currency fell almost 7% in 2016 against the Dollar to hit new 8-year lows in December.

Chart of China's gold price per gram vs. the Yuan per Dollar exchange rate

China's domestic gold mining output meantime held the No.1 spot won in 2007, creeping 0.8% higher to 453 tonnes after falling for the first time since 1999 in 2015 on the CGA's update.

Globally, 2016's gold mining output was set to show its first drop since 2008 according to a November update from specialist analysts Thomson Reuters GFMS.

Overtaking the United States in 2015, gold mining output from Russia "[will] surely maintain the third position after China and...very close to Australia," said chairman of the Union of Gold Producers of Russia (UGPR) Sergey Kashuba last month.

Minister of Natural Resources Sergei Donskoi told the TASS news agency at New Year that Russia mined 293 tonnes of gold in 2016 – a massive 9% jump from the previous year's confirmed record high.

With new US president Donald Trump vowing to "build that wall!" to try and reduce illegal immigration from Mexico, "We have a negative US Dollar view," Bloomberg News quotes Swiss bank UBS's wealth-management team in Singapore, advising clients to consider gold as a hedge against "the [extra] debt that Donald Trump promises through higher infrastructure and lower tax...clearly [a] negative for the currency."

Investment through the giant SPDR Gold Trust (NYSEArca:GLD) – backed by large gold bars – however fell once more on Tuesday, retreating even as bullion prices touched new 9-week highs at the benchmark price auction in London.

The largest silver-backed ETF – the iShares Silver Trust (NYSEArca:SLV) – also shrank Tuesday, with investors liquidating almost 30 tonnes' worth of shares.

That took the SLV's holdings back to a new 7-month low of 10,494 tonnes, equal to some 32% of silver's total global demand in 2016.

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum 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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