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World’s Top Gold Market Freezes as Chinese Shoppers Stay Away
China is the biggest buyer of gold bars, coins and jewelry, but the national shutdown to contain the virus has emptied malls, while the premium charged to buy the metal in China has evaporated. It leaves the industry staring down a long road to recovery, even as Beijing tries to jump-start broader consumption with a campaign to get shoppers out and about. The market’s struggles in China may present a headwind for prices, which last month topped $1,700 an ounce for the first time in seven years. The traditional haven also faces a drag from slower retail consumption in India, Europe and the U.S., as well as Russia’s surprise decision to halt purchases by its central bank. Last year, Chinese consumers accounted for about a fifth of total gold demand of 4,356 tons, according to the World Gold Council.
China’s retail sales of gold, silver and jewelry plunged 41% in the first two months of the year. Zhang estimated that the amount of gold jewelry sold in the first quarter will have fallen by at least half, setting up a significant decline for the whole year. “Consumers won’t return to buy gold jewelry until the pandemic ends, and Chinese investors are also unwilling to purchase gold with their deposits at the moment,” he said.
The trepidation contrasts with a flurry of activity on the global market last week, which saw gold refineries shut and aircraft grounded, creating a massive squeeze on gold futures in New York as traders scrambled to get enough physical metal to meet their commitments.
It also comes as the Chinese economy inches back to normality and new infections slow to a trickle. The nation was about 90% back to work at the end of last week, according to Bloomberg Economics. Still, consumers remain hesitant after weeks of government warnings about the dangers of mingling with others, and as financial pressures mount amid rising unemployment. The market remains concerned over the constraints around delivering bullion, which is contributing to price volatility, said Haywood Cheung, president of the Chinese Gold & Silver Exchange Society, which trades physical gold and silver in Hong Kong.
Production cuts at gold refiners will help boost prices, he said, while broader conditions remain supportive to bullion.
https://www.bloomberg.com//news/articles/2020-04-01/world-s-top-gold-market-freezes-as-chinese-shoppers-stay-away
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