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World’s top gold market freezes as Chinese shoppers stay away

By Annie Lee and Jinshan Hong

The coronavirus pandemic has frozen the Chinese gold market, torpedoing demand at a time when buyers in different places in the world are clamoring for the security of bullion.

China is the most important purchaser of gold bars, cash and jewelry, but the nationwide shutdown to include the virus has emptied shops, whilst the top class charged to buy the steel in China has evaporated. It leaves the trade staring down an extended road to recovery, at the same time as Beijing tries to jump-start broader consumption with a marketing campaign to get consumers out and about.

The market’s struggles in China might provide a headwind for costs, which last month crowned $1,700 an oz for the first time in seven years. The conventional haven also faces a drag from slower retail consumption in India, Europe and the U.S., in addition to Russia’s wonder choice to halt purchases through its central financial institution. Last year, Chinese shoppers accounted for about a fifth of general gold demand of 4,356 tons, in step with the World Gold Council.

“Domestic demand for gold will get well very slowly,” mentioned Zhang Yongtao, chief government officer of the China Gold Association. “Even after processors resume manufacturing, one primary factor is that there are not any orders,” he mentioned.


China’s retail sales of gold, silver and jewelry plunged 41 in keeping with cent in the first two months of the year. Zhang estimated that the volume of gold jewelry offered in the first quarter could have fallen through at least part, putting in place a vital decline for the whole year. “Consumers gained’t go back to buy gold jewelry until the pandemic ends, and Chinese buyers are also unwilling to buy gold with their deposits at the present time,” he mentioned.

The trepidation contrasts with a flurry of process at the world market last week, which noticed gold refineries close and plane grounded, developing a large squeeze on gold futures in New York as traders scrambled to get sufficient bodily steel to meet their commitments.

It also comes because the Chinese economic system inches back to normality and new infections slow to a trickle. The country used to be about 90 in keeping with cent back to paintings on the finish of last week, in step with Bloomberg Economics. Still, shoppers remain hesitant after weeks of government warnings about the dangers of mingling with others, and as financial pressures mount amid rising unemployment.

Demand Collapses
Jewelry outlets have felt the warmth particularly. Luk Fook Holdings International Ltd. issued a profit warning in March after sales at the mainland tumbled 37 in keeping with cent in the first two months.

“Most of the group’s shops in mainland China reopened in March with stepped forward store site visitors, whilst buyer visits to shops in Hong Kong and Macau were nonetheless sparse,” mentioned Deputy Chief Executive Officer Nancy Wong. “It’s expected that it’ll take a while for the trade to return to commonplace.”

Gold worth premiums in China “have collapsed to unfavourable levels not seen since the Great Financial Crisis,” Citigroup Inc. mentioned in a word this week. The financial institution mentioned that implies jewelry consumption may just hit lows not noticed in a decade or extra.

The market remains concerned over the limitations around delivering bullion, which is contributing to value volatility, mentioned Haywood Cheung, president of the Chinese Gold & Silver Exchange Society, which trades bodily gold and silver in Hong Kong.

Production cuts at gold refiners will lend a hand boost costs, he mentioned, whilst broader prerequisites remain supportive to bullion. “Even if the virus scenario improves, we will continue to look lower rates of interest, weaker capital markets and world financial easing, which is able to strengthen gold costs,” he mentioned.

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