China investors help drive up gold prices

It appears Chinese investors are driving up the price of gold.

goldbars_3544916bChina was one of the world’s biggest consumers of gold last year, as the Chinese sought protection from their weakening currency, and the trend is expected to continue this year, the World Gold Council said on Thursday. Central banks around the world were also big purchasers.

The price of gold was up 4.6% to $1,249.50 midday Thursday in New York. That puts the price up $186 per ounce since the start of 2016. Earlier in the day, the metal jumped 5.8% to $1,263.90 an ounce, its highest point since February 2015, making it the biggest intraday advance since 2009.

Demand for gold coins in China jumped 25% in the fourth quarter from a year earlier as consumers sought to protect their wealth from further devaluations of the yuan, the WGC said in its annual “Gold Demand Trends” report. The WGC’s members include the world’s leading gold mining companies.

For 2015, Chinese demand for gold totaled 985 tonnes, followed by 849 tonnes in India. Together, they accounted for nearly 45% of total global demand, with consumer demand up 2% and 1% respectively in those countries.

However, the WGC said demand for gold for jewelry fell 3% in China from a year earlier, as consumers worried about the falling stock market amid a slowing economy. Since most of the global demand goes into jewelry, this dip means global demand for the year was flat at 4,212 tonnes. Last year, Indian jewelry demand reached its third highest level on record at 654.3 tonnes.

Central banks sharply accelerated their gold purchases in the second half of last year, up to 25% in the fourth quarter, to diversify reserves away from the US dollar and falling oil prices. The report said last year’s purchase of 588.4 tonnes by central banks was the second only to their record high purchase of 625.5 tonnes in 2013.

“Looking ahead, physical demand will continue to be supported by strong central bank purchases, and continued buying of jewelry, bars and coins by households across the world, led by India and China,” Alistair Hewitt, WGC’s head of market intelligence, told Reuters. “If we just look at the year to date, the investment case for gold is as strong as ever. While stock markets have wobbled, gold has performed well.”



Categories: Asia Unhedged, China

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