Gold News

Gold Price Up 3.5% in USD for Easter Week But China at Record Discount, India Demand 'Down 1/3rd in 2020'

WHOLESALE gold prices in London's bullion market headed into the long Easter weekend at $1675 per ounce on Thursday, trading 3.8% higher from last Friday's finish as world stock markets extended their rebound from March's Virus Crisis crash.
 
For Eurozone and UK investors, gold prices traded at their highest ever weekly closes, up at €1535 and £1345 per ounce respectively.
 
Chart of London gold bullion price in USD, GBP, EUR. Source: St.Louis Fed via LBMA
 
With Dollar prices rising this week for gold settled in London – heart of the global bullion market – prices in China have also risen, gaining 2.1% in Yuan terms and coming ¥7 per gram below the new 7-year high of ¥277.5 hit this time last month.
 
Thanks to that slower rate of rise however, plus the Yuan falling on the currency market, that left Shanghai's benchmark price at a record $20 per ounce below London quotes on average across the week, suggesting heavy over-supply of bullion versus demand in gold's No.1 household consumer market.
 
The relative weakness in China's wholesale gold prices comes even as the Shanghai Gold Exchange cut margin down-payment requirements for its gold contracts to 8% earlier this week after hiking them to 10% amid March's historic volatility.
 
It also comes as the politburo begins lifting the lockdown of Covid-source city Wuhan, allowing some people to venture outdoors and even leave the town – albeit in protective gear and only if they have a "green" reading on the government-enforced personal health app.
Chart of London bullion price and Shanghai premium in US$/oz. Source: BullionVault
 
"China borders are still closed," Reuters quotes German refining group Heraeus' Hong Kong manager Dick Poon. "I don’t think people will spend more money, they would use it to buy hygiene materials or supermarket products, but not luxury items."
 
No.2 consumer India will meantime see gold demand drop 30% in 2020 from last year's already weak total, according to the Indian Chamber of Commerce.
 
"Following the coronavirus outbreak, the gems and jewellery sector in the country has come to a complete standstill," says the Economic Times, "[with] stores closed across the country.
 
"This is an industry which contributes 7% of GDP and employs more than 5 million people."
 
The ICC is asking the government to extend tax payment holidays and also to roll-over gold metal loans, owed by the country's primarily small-scale artisan jewellers, at lower rates of interest. 
 
Western investment demand for gold and related proxies continues to rise, in contrast, with both of the largest gold-backed ETF trust funds traded on the New York Stock Exchange expanding again on Wednesday.
 
That extends the strongest quarterly growth ever according to data compiled by the mining industry's World Gold Council, with gold ETFs across the globe needing an additional 298 tonnes to back their stock-market value between New Year and end-March – equal to more than 1/3rd of global gold mine output over that period.
 
"During the past year," says the WGC, "gold ETFs added 659 tonnes" – some 19% of a full year's mine output – "the highest on a rolling annual basis since the financial crisis, with assets under management growing 57% [by value] over the same period."
 
European-listed ETF saw the largest inflows in March, says the WGC data, "and Asia and other regions registering the largest percentage growth during the month."

Adrian Ash is director of research at BullionVault, the physical gold and silver 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 is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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