Gold News

Gold Bar Buying Rallies in China as ETF Investing 'Plugs Covid Demand Gap', Stocks Markets Slip

GOLD BARS traded in London ticked higher in quiet trade Tuesday, holding in a tight $10 range above $1900 per ounce as world stock markets extended yesterday's US plunge as the Covid pandemic's second wave worsened ahead of next week's US presidential election.
US tech-stock index the Nasdaq struggled to rally from Monday's 2.0% drop, led by German-based SAP (Nasdaq: SAP) plunging over 20% after it slashed 2020's earnings outlook on falling sales amid the global virus crisis.
The EuroStoxx 600 index meantime slipped to trade 5.0% below the peak first reached in June, halving the spring's Covid Crash.
Wholesale gold bars priced in Euros have added €100 per ounce since then, trading at €1611 in London on Tuesday.
Chart of EuroStoxx 600 index vs. gold priced in Euros. Source: Google, BullionVault
"Gold is continuing to lack support from physical gold demand in Asia," says Germany's Commerzbank in a note.
"Swiss trade data had revealed last week that gold demand in India and China was still rock bottom in September."
Data from the Beijing-approved China Gold Association today said the country's world-leading mine output slipped 1.9% in July-September compared to the same period last year, a slower rate of decline than Jan-June's 5.9% drop.
China's consumer gold buying – also the largest among any nation worldwide – fell 8.1% year-on-year in Q3 after plunging by 38.3% in the first half of the year. Within that, jewellery demand dropped 17.8% (versus -42.1% in H1), industrial use dropped 13.6% (-25.2% in H1) but private demand for gold bars and coins rose 25.0% (-32.1% in H1).
Gold bar and coin demand worldwide will rise around 7% in 2020, according to data from specialist analysts Metals Focus, amid a broader 25% collapse in gold demand for fabricated products.
"Investors will continue to plug the demand gap," says competitor consultancy Refinitiv, pointing to the 3-fold jump in annual flows to gold-backed ETF trust funds traded on the stock market.
"Stockpiling 1,205 tonnes this year," reckons Refinitiv's research director Cameron Alexander, gold ETFs will set another annual record in 2021, expanding to need another 1,362 tonnes next year.
Gold's 2 largest ETFs showed little change yesterday, with the SPDR Gold Trust (NYSEArca: GLD) stemming 4 days of net investor outflows to need 1263.8 tonnes of gold bars, while the smaller iShares Gold product (NYSEArca: IAU) shrank by 0.1 to 526.4 tonnes
Silver's giant iShares ETF (NYSEArca: SLV) was also unchanged in size Monday as the metal's price lagged gold's small rally to trade near 1-week lows at $24.30 per ounce.
The SLV shrank by 0.4% last week to the smallest in 3 weeks, needing 2% fewer silver bullion bars in backing that mid-August's all-time record.
India's key Hindu festival of Diwali next month is now seeing some re-stocking by wholesalers and dealers, according to press reports, helping prices inside the world's No.2 consumer nation edge back above international quotes for wholesale gold bars for only the 4th month in the last 60 according to data compiled by the mining industry's World Gold Council.
Where India is undergoing a gold boom right now is in households pledging gold jewelry to raise lower-rate loans, most especially from non-bank financial companies, in a market perhaps worth over $90bn already in 2019.
Market-leader Muthoot (NSE: MUTHOOTFIN) today opened a sale of $270m in bonds, aiming to raise finance from investors to fund its fast-growing loan book.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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