Gold Cuts Last Week's Price Rebound in Half as China's Demand Sinks
Thursday, 11/28/2024 15:57
GOLD BULLION slipped in London trade Thursday after halving last week's sharp price rebound amid worsening signs of demand destruction in China, the precious metal's No.1 consumer country.
Bullion prices edged down overnight to ¥610 per gram on the Shanghai Gold Exchange, fixing 4.1% below end-October's fresh all-time high with a discount of $12.40 per Troy ounce to quotes in global gold trading and storage hub London.
Over the last 2 decades, Shanghai gold has shown a premium to London on almost 4-in-5 trading days, reflecting strong domestic demand versus supply and thereby encouraging new bullion imports with an typical incentive of $8 per ounce.
But
the Shanghai gold price last saw a premium on 21 October, and with demand in the No.1 consumer nation sinking in the face of 2024's strong price surge, London gold has since lost $100 per Troy ounce, trading this afternoon below $2640.
That's down $150 from London
gold's all-time record spot-market high of Halloween. Since then, Shanghai has traded at an average discount of $14.25 per Troy ounce across November.
It had previously averaged a premium of $21 per ounce in 2024, well over twice the historical premium.
"The lower the gold price is, the better it will be for us," says Kenny Lee Koi Ian, head of the Goldsmiths’ Guild in Chinese luxury retail destination Macau.
Not only would lower prices make it "easier for residents to make purchases, benefiting business sales,"
Lee tells Macau Business, but this fall's new record prices have “led [to so] many residents to sell their gold [that] buying outstripped selling," leading to a "cash crunch" among the city's gold retailers.
Chinese jewellery giant Chow Tai Fook yesterday posted a 20.4% plunge in revenue for the half-year to end-September,
blaming high prices for deterring demand.
Since March CTF has now closed 240 points of sale, some 3.4% of its near-7,000 total outlets across China, Hong Kong and Macau.
Hong Kong-based jeweler Luk Fook meantime
closed 175 stores as half-year revenues sank by more than 1/4 and net profits more than halved thanks to the cost of hedging the value of its gold inventory.
Gold bullion landed in China has risen 26.7% by Yuan value so far this year.
Shares in No.1 jeweller Chow Tai Fook (HKG: 1929) have meantime lost 37.5% on Hong Kong's stock exchange – cutting its market capitalization to the equivalent of $9.4 billion in US Dollar terms – while Luk Fook (HKG: 0590) has dropped 29.0%, cutting its market-cap to US$1.1bn.
"Several Chinese commercial banks have raised the risk classifications on...physical gold investments," says news-site Yicai, and "banks have
ceased opening new accounts for these products.
"Existing clients can only close positions, not increase them," Yicai says, extending a trend first
starting in June following spring 2024's Chinese 'mania' in gold coins, small bars, ETFs, banking products and retail brokerage accounts.
China's CSI300 share index today dropped 0.9% but European bourses edged 0.5% higher as US stock markets closed for Thanksgiving after the S&P500 slipped 0.4% from Tuesday's fresh all-time high.
Euro gold prices today struggled to hold above €2500 per Troy ounce – a new all-time high 6 weeks ago – while the price of gold in UK Pounds also rallied weakly off a 1-week low, fixing below £2085.
The Dollar steadied above yesterday's 2-week low, holding 1.1% beneath last Friday's fresh 2-year peak, and European Brent crude oil steadied above 1-week lows.
But Dutch TTF natural gas contracts edged further beneath last week's 12-month highs despite Ukraine – which today lowered the age of military conscription to 18 – reporting heavy Russian bombardment of its domestic energy infrastructure.
Iran-backed Houthi forces in Yemen reported fresh air strikes by US-UK military, Iran called the anti-Assad victories in Syria a "US-Zionist ploy", and Israel imposed another curfew across southern Lebanon amid its ceasefire with Iran-backed Hezbollah fighters.
War-torn Sudan's humanitarian crisis – now displacing 11 million and pushing half the population into 'acute' hunger – was meantime knocked off the UK's front pages by a fresh sex scandal at the BBC.
Like gold,
the price of silver fell yet again, hitting an 11-week low at $29.65 per Troy ounce overnight before rallying back above $30, an 11-year high when reached amid this spring's China-led gold surge that's now 13.3% below mid-October's 12-year peak.
Email us
