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Daily Nugget: Weak Data From China Pressures Gold

Published 04/11/2014, 03:57 PM
Updated 05/14/2017, 06:45 AM

Yesterday the gold price hit a two-week high ($1,324.40) thanks to a healthy mixture of safe-haven demand, a weaker US dollar index and, of course, perceptions over the FOMC. Thursday gave market participants more time to digest the FOMC minutes and they decided that the committee was more dovish than had originally been perceived back in March. This sentiment has given gold three-days of gains. The price of gold also received a boost after the NASDAQ took its biggest jump since august 2011.

This morning Gold is trading below the two-week high following the release, overnight, of weak economic data from China. Silver is also down by 0.5%.

Concerns over the health of the Chinese economy continue to circulate following the release of the country’s latest trade data. In March exports fell 6.6% year-on-year, while imports were down by 11% over the same period. The country is world’s largest importer of raw commodities, so expect fresh pressure on prices. Volumes on the Shanghai Gold Exchange are, according to Bloomberg, about 40% lower than they were three weeks ago.

This week we’ve mentioned a fair few banks and their predictions for gold. My most favourite was Morgan Stanley (NYSE:MS) who said that gold would drop as Ukraine was no longer an issue…bad luck guys. Today we turn our attention to UBS, commodity analyst Tom Price, told Bloomberg that they expect to see $1,300 – $1,350. This is thanks to an ongoing US recovery which will see interest rates climb. This a common answer, however one wonders if anyone’s notice that any signs of economic recovery have been driven by QE, i.e. it’s a not real recovery, and therefore, not sustainable.

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Good news from China, however is from the China Gold Association who have released a statement saying “Chinese gold consumption in the year 2013 showed 41 % upsurge from previous year, reaching 1,176 tones [sic]”. We asked China gold expert, Koos Jansen about this and he believes the numbers are suspect. We’re looking forward to the release of his analysis, shortly.

On the flip-side of China’s insatiable gold demand (which is fully encouraged by the government), an Indian government official has told Reuters that gold imports to India fell by 40% last year. This huge drop is thanks to a series of gold restrictions that were put in place in order to reduce the current account deficit. It does seem, however that the government and Reserve Bank of India are working on ways to relax the restrictions in a manner which does not open the flood-gates. For instance, so far this year the RBI has allowed five more private banks to import gold.

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