Gold Bullion Slips as China Skips Buying Again, France Votes Against Le Pen

GOLD FELL from 7-week highs in London's bullion market on Monday as price pressure in the precious metal's No.1 consumer nation China sank to the weakest so far in 2024 after the Chinese central bank said it didn't buy gold for the second month running in June, writes Atsuko Whitehouse at BullionVault.

 

Western stock and bond markets rose slightly, with the CAC40 in Paris 0.2% higher following the hard left's surprise defeat of the far-right National Rally in France's parliamentary elections.

 

India and Poland both continued adding to their gold reserves last month, according to data analysed by the mining industry's World Gold Council.

 

But the People's Bank of China held its reported gold bullion holdings at 2,264 tonnes, unchanged from April's figure, after ending 18 months of consecutive gold buying in May, according to the State Administration of Foreign Exchange site.

 

Spot market quotes for gold bullion in London – the precious metal's central trading and storage hub – went down 0.8% to $2372 per ounce, cutting 1/3rd off last week's gain, the steepest such rise in six as traders priced in the prospect of 2 rate cuts by the US Federal Reserve this year following weakness in US jobs data.

 

Gold bullion in China had earlier risen 0.3% overnight to a 1-month high of ¥559 per gram on the Shanghai Gold Exchange (SGE). But while that market continued to show a premium to London prices, that incentive for new imports of bullion dropped to just $10 per Troy ounce, the lowest in 7 months and sharply below the 10-week low already averaged from last Monday to Friday at $26 per ounce.

 

 

With rising central bank gold buying and holdings a key part of many analysts' bullish outlook, "Some pullback in gold prices shouldn't be ruled out following the PBOC data," says Christopher Wong, foreign-exchange strategist at Oversea-Chinese Banking Corp in Singapore.

 

"It is not uncommon for China to temporarily halt purchases, given that gold prices have rallied quite sharply" to this spring's new all-time highs.

 

While India's central bank bought the most gold for its reserves in 2 years on June's data, household demand in India has slowed hard as global prices have risen, forcing dealers to offer deep discounts to London prices.

 

Inclusive of 15% import and 3% sales levies, Indian gold discounts last week reached more than $19 per Troy ounce, rising from the previous week's discount of $15 according to World Gold Council data.

 

"People have stopped buying," says a jeweller in downtown Bengaluru to the Financial Times, pointing to bullion prices hovering near record highs. 

 

"A person who could afford to buy around 100 or 200 grammes has just shifted to like 50 to 60 grammes."

 

The slowdown in gold demand means India's jewelry industry is set to repeat its annual and repeatedly ignored pleas for lower import duty ahead of the new coalition government's post-election budget due later this month, one Kolkata-based dealer says, following the loss of Prime Minister Narendra Modi's majority in Parliament.

 

Like European stock markets, Western government bond prices rose Monday, easing  Paris' borrowing costs lower – and narrowing the 'risk premium' suggested by the OATS-Bunds spread between French and German bond yields – despite the Eurozone's 2nd largest economy heading for a hung parliament after left-wing coalition the New Popular Front (NFP) unexpectedly gained the most seats in Sunday's second round of voting, pushing Marine Le Pen’s National Rally into 3rd place behind President Emmanuel Macron’s centrist alliance.

 

Gold prices for European investors fell to €2191 per ounce as the single currency bounced from early losses.

 

The UK gold price in Pounds per ounce also fell, down by 0.8% to £1852 per ounce as Sterling strengthened on the FX market amid the new Labour Government of Sir Keir Starmer vowing to make economic growth its "national mission" after last week's landslide victory following 14 years of Conservative rule.

 

Silver prices slipped down 0.8% to $30.99 per ounce after recording 4-week highs near $31.50 last Friday.

 

Longer-term US interest rates rallied in the bond market, and the Dollar also rose slightly after recording its first weekly drop in seven ahead of US inflation data due later this week, plus Federal Reserve Chair Jerome Powell giving his semi-annual testimony on monetary policy to Congress in Washington.