China Gold Mania – Coins, Bars and Jewelry Sales Surge 108%

Today’s AM fix was USD 1,456.00, EUR 1,106.22 and GBP 935.07 per ounce.  
Yesterday’s AM fix was USD 1,469.50, EUR 1,113.60 and GBP 942.95 per ounce.


Cross Currency Table – (Bloomberg)

Gold fell $17.30 or 1.17% yesterday to $1,458.70/oz and silver slid to $23.24 and finished down 2.60%.

Gold remains under pressure despite very robust demand and anaemic supply globally. 

This suggests that speculators in the futures market continue to hold the upper hand. While this may continue in the short term and lead to further short term weakness in the price, the long term supply demand fundamentals will almost certainly lead to higher prices. We continue to believe gold will surpass its real inflation adjusted high of $2,400/oz in the coming years.

The U.S. Federal Reserve’s decision to maintain its loose monetary policy will support gold as the Fed’s money-printing to buy assets will stoke inflation – it is not a question of if, rather when. 

Gold will also be supported by the ultra loose monetary policies from the ECB and the Bank of England.

The Fed reiterated it would continue to buy $85 billion worth of bonds every single month to support the sickly and weakening US economy. 

Stocks fell on the statement and gold tracked other markets lower despite renewed worries over the Chinese, Eurozone and U.S. economies after the latest economic data showed the real risk of a global recession or depression.


Gold in USD, 2 Year – (Bloomberg)

There continues to be difficulty in securing physical bullion in large volumes, particularly in the small coin and bar market and particularly in the silver market.

The Shanghai Commission of Commerce said today that sales of gold and jewelry jumped 108% from a year earlier, leading all other categories.

This past May Day weekend saw retail sales rise by as much as 20%, most of it thanks to people shopping for gold jewelry.


Gold in Euros, 2 Year – (Bloomberg)

According to the Shanghai Commission of Commerce, retailers in the city reported total sales of 3.37 billion yuan ($539 million) between Monday and yesterday, up 18.8% from the same period of last year. 

Sales of gold jewelry and even gold bars rose as gold prices fell and started to look more affordable. Demand may continue or increase as this is the start of wedding season in China.

In Asia, supply remains tight and premiums are high at $3 over spot in Hong Kong.


Gold in GBP, 2 Year – (Bloomberg)

Hong Kong retailers report they were swamped over the three-day May Day holiday by tens of thousands of mainlanders in search of one thing: cheap gold.

There were long queues outside many shops and the China Gold Association reported that gold sales had tripled on many days. 

Investors are now waiting for the US non-farm payrolls report for April scheduled for release on Friday. Given the US economy is weakening, the number is likely to come in weaker than expected which should lead to safe haven demand for gold.
 

Mark O'Byrne

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