By Barani Krishnan
Investing.com - Gold- futures ended just a touch higher on Monday after smashing the $1,700-per-ounce ceiling as players weighed the demand destruction in top jewelry market China versus the safe-haven buying on coronavirus fears.
Gold futures for April delivery on New York’s COMEX settled up down $3.30, or 0.2%, at $1,672.40 per ounce. April gold hit a 7-year high of $1,703.90 earlier as turmoil across global markets from the crash in oil prices renewed the yellow metal’s charge after last week’s 7% rally.
Spot gold, which tracks live trades in bullion, was virtually flat at $1,657.68 by 2:20 PM ET (18:20 GMT). The session high was $1,703.10.
“There’s a lot of activity obviously in gold but what’s really moving it is people putting money into it as a safe haven while others are selling amid the demand destruction in China,” said Eric Scoles, commodities strategist at RJO Futures in Chicago.
“There is also talk that China’s central bank may be liquidating some of its gold holdings to bolster its cash though there’s no real evidence of it.”
According to a report by China’s central bank earlier this month, its gold reserves stood at $100.847 billion in February, up $99.24 billion from January. It will report its March holdings in April.
China's jewelry market is the largest in the world, traditionally accounting for 30% of global demand. But London-based research firm Metals Focus said last month it expected a 6% drop sales in China this year due to the novel coronavirus, which has affected demand for almost any non-essential purchase in the second-largest economy.
Since gold is one of the most liquid assets around — and one of the few to catch a bid now — hedge funds have also been selling their long holdings in gold in recent weeks to raise cash to cover bad investments in equities and elsewhere.
“Near term rushes to liquidity remain a risk” for gold, TD Securities said in a note, adding, however, that “positioning is becoming stickier at higher levels as further rate cuts globally offer fundamental backing, suggesting the precious metals rally is here to stay.”