Gold News

Gold Bars "Re-Stocked in China" as New Year Holidays End with 1st Default in $1.8 Trillion Wealth-Management Product Industry

GOLD BARS traded in London's wholesale market recorded a new 3-month high Thursday lunchtime, rising to $1297 per ounce as Western stock markets followed Asian equities lower.
 
Silver rose back towards $20.40, the 3-week high it reached yesterday.
 
With the Chinese New Year holidays ending this weekend, trading in gold bars on the Shanghai Gold Exchange was firm again on Thursday.
 
But while prices rose to the equivalent of $1292 by the Chinese close, the premium above wholesale gold bar prices in London fell to just $3 per ounce on the most active contract.
 
Savings in China's "wealth management products" grew 46% last year, the China Trustee Association said Thursday, to a record $1.8 trillion. But the industry now faces "unprecedented uncertainty" after the near-default of one product, Credit Equals Gold No.1, last month.
 
A much smaller product did default last Friday, Reuters reports, with state-media saying it failed to repay investors on maturity.
 
Again lending wealthy bank clients' money to a coal-mining company in return for a much higher yield than deposit accounts pay, the $50 million product was created by Jilin Province Trust, and sold through China Construction Bank to finance Shanxi Liansheng Energy.
 
Beijing authorities today announced new rules for how such non-bank savings products can be built and marketed.
 
Some $875 billion of such investments will mature in 2014, says Haitong Securities Co., up more than 50% from last year and meaning that "[borrowing] firms can no longer shoulder all the risks tied to offering implicit guarantees."
 
Over the last decade, Chinese households spent some $200 billion buying gold bullion bars and jewelry, based on data archived by market-development group the World Gold Council.
 
Those 5,170 tonnes of gold – almost five times the People's Bank's official reserves – were worth $215 billion at Thursday's London Gold Fix.
 
Selling gold bars but primarily jewelry in more than 2,000 outlets across Hong Kong and the mainland, leading retailer Chow Tai Fook last week reported same-store growth of 37% for the run-up and start of Lunar New Year compared with 2013.
 
In the world's wholesale gold bars market, "Stock replenishing by Chinese jewellers after last week's New Year celebration may have created additional demand," says today's Commodities Weekly from French investment and bullion bank Natixis.
 
Releasing end-2013 results meantime, the world's largest gold mining company, Barrick Gold, today slashed its estimated reserves in the ground by 26% to 3,200 tonnes, and said after a "tough year" it will now produce 200 tonnes in 2014, almost 30% below previous forecasts.

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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