Gold Falls, Then Sets New Record Price as China's Jewelry Demand Sinks
Monday, 10/28/2024 15:08
GOLD PRICES fell as the US Dollar rose to a 3-month high overnight Monday, trading 1.2% below last week's fresh all-time high as Iran delayed any response to Israel's weekend airstrikes and new data said gold demand in China, the world's biggest bullion consumer, has sunk in the face of the precious metal's bull run to new records,
writes Atsuko Whitehouse at BullionVault.
But rallying back to $2743 per Troy ounce as US trade began, gold bullion then settled in London at a fresh record-high in Dollar terms at the global trading and storage hub's 3pm benchmark auction.
Spot gold had earlier dropped as much as 0.8% to $2725 per Troy ounce during Asian trade as the Dollar Index reached its highest level since late-July thanks to the Japanese Yen plunging after Sunday's snap election saw Tokyo's ruling coalition lose its parliamentary majority for the first time in 15 years.
Having jumped in the first 3 months of this year,
China's private-sector gold consumption has now fallen 11.2% by weight so far this year in total compared to the first 3 quarters of 2023 according to data published today by the China Gold Association.
Jewelry purchases – which account for over half of the nation's world-leading gold demand –
dropped by over 27.5%.
But household demand for retail gold bars and coins, whilst still smaller than jewelry, climbed by 27.1% thanks to those products' investment appeal and lower cost above spot market wholesale quotes, says the state-mandated CGA.
"Gold prices have been on the rise over the first three quarters, affecting jewelry buying," the Association explains.
Gold prices on the Shanghai Gold Exchange today rose to ¥625 per gram, just ¥3 below last Wednesday's new all-time high and registering an annual gain of nearly 1/3rd in Yuan terms.
But SGE prices – which have historically traded at a premium to London quotes, incentivizing new bullion imports – continued to show a discount, with the gap below London widening to the equivalent of $15 per Troy ounce on Monday.
Up from last week's average discount of $6, that's almost twice the size of the more typical
Shanghai gold premium.
"While the speed and scale of gold's rally this year
could trigger the occasional bout of volatility," says the latest note from Swiss bank and London bullion market-maker UBS, "we think prices will continue to rise in the months ahead" thanks to lower real rates of interest on cash, further central-bank diversification away from the Dollar, plus today's continued geopolitical violence and tensions.
"We do not seek war, but we will defend the rights of our nation and country," said Iranian President Masoud Pezeshkian on Sunday, a day after Israel's pre-dawn response to this month's Iranian missile attack avoided impacting the world No.7 oil producer's energy infrastructure but targeted facilities allegedly used to manufacture offensive as well as surface-to-air weapons.
"We will give an appropriate response to the Zionist regime's aggression."
Crude oil today dropped by over 6% while
the price of silver – primarily an industrial metal – tracked gold prices and fell 0.9% to $33.43 per ounce.
Gold priced in the UK Pound and the Euro fell by 0.6% to £2103 and €2525 per ounce respectively before rallying close to last week's new 3pm
London gold record highs.
With financial markets now entering the final full week before the US presidential vote between Donald Trump and Kamala Harris, "The risk-reward in being short [of gold going] into the US election and escalating Middle East geopolitics is terrible," says precious metals strategist Nicky Shiels at Swiss bullion refiners and finance group MKS Pamp.
Key US inflation and jobs data are due for release Wednesday through Friday.
"The problem with gold," says Shiels, "is trying to square the $140 rally since October lows, which is
simply too much too soon."
The yellow metal on Friday recorded its 5th weekly gain in the past 7 weeks.
Following Japan's weekend election, in which the coalition led by the Liberal Democratic Party (LDP) lost outright control of Parliament for the first time since 2009, Tokyo's stock market today rose after an initial dip as the Yen weakened on the currency market, benefiting the world No.4 economy's export giants.
Palladium meantime extended last week's surge on US calls for new sanctions against No.1 producer Russia, edging fresh 2024 highs above $1220 per Troy ounce.
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