Gold News

China's Gold Investment 'Strong' on Mixed Data at $2400 as Price Defies Hawkish US Fed

The SHANGHAI gold price continued trading above the equivalent of $2400 per ounce for the 4th session running on Wednesday, extending China's strong premium to London bullion quotes even as those global gold prices rose towards last week's new all-time highs in Dollar, Euro and UK Pound terms despite expectations collapsing for a US Fed rate cut anytime soon.
With betting on Fed interest rates in the investment markets now seeing a possibility that the US central bank may actually raise the cost of borrowing next month in the face of rising inflation, London gold prices rose to $2389 per Troy ounce around the City's 3pm bullion auction, barely $10 below Friday's fresh benchmark high of $2401 – the 15th new record high gold price in 31 trading days since the start of March.
Gold prices in China had earlier fixed at ¥565 per gram Wednesday afternoon at the Shanghai Gold Exchange, equivalent to $2430 per Troy ounce and 0.4% below last Friday's new SGE benchmark high in terms of the onshore Yuan – the 17th fresh record in 32 sessions since the start of last month. 
Chart of SGE vs. London afternoon benchmark gold prices. Source: BullionVault
"China [got] mixed economic numbers" this week, notes bullion-market analyst Rhona O'Connell at brokerage StoneX.
"Good Q1 GDP, but year-to-date property sales are horrible [and] investment poor."
China's official state data agency yesterday said the world's 2nd largest economy expanded by 5.3% per year during January-to-March, beating analyst forecasts of 5.0% growth despite last month showing weaker-than-expected industrial output and retail sales.
Investment in property development fell by almost 1/10th from the first quarter of 2023, and capital-raising on China's equity markets sank to the weakest in over 2 decades according to data from analysts Dealogic quoted by the Financial Times.
In contrast, "Gold investment demand is strong," said a note from the state-affiliated China Gold Association last month, with China's gold investing and trading surging as prices jumped.
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"As domestic assets such as equities and real estate weakened," said the CGA, "the impressive performance of the gold price in Renminbi has attracted [Chinese] investors looking for safe-haven assets, which led to continued demand for gold bars and coins."
China's CSI 300 share index today rallied 1.5%, cutting its 1-month loss to 1.0% but holding below half its peak value of February 2021.
Global stock markets steadied as well on Wednesday after falling for 3 sessions running, holding the MSCI World Index 4.0% below end-March's record high.
But while US and other Western government bond prices also rallied – edging long-term borrowing costs down from yesterday's 5-month highs – betting on next month's Federal Reserve meeting saw expectations for a rate cut evaporate entirely, with 1.6% of betting backing a rise for the 1st time so far in 2024.
The year began with traders almost unanimously expecting a March rate cut from today's 2-decade high of 5.33% per annum. But consensus bets now put that first rate cut no sooner than September, with year-end rates forecast at 4.97% according to the CME derivatives exchange's FedWatch tool – almost 2 cuts fewer than the US central bank itself forecast in its latest 'dot plot' projections.
Following last week's surprise strength in US CPI inflation and this week's stronger-than-expected US retail sales data, "If higher inflation does persist, we can maintain the current level of restriction for as long as needed," said Fed chair Jerome Powell yesterday.
"My baseline outlook," added Fed vice chair Philip Jefferson in separate but even more 'hawkish' remarks, "continues to be that inflation will decline further with the policy rate held steady at its current level."

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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