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Gold Price Falls Despite France 'Warning' as GLD ETF Shrinks, China Demand Softens

GOLD PRICES fell on Monday after the world's biggest bullion-backed investment ETF saw its largest weekly outflow since January despite the uncertainty in global and especially France's politics, while demand in gold's No.1 consumer nation China remained muted, writes Atsuko Whitehouse at BullionVault.
The drop in China's reported house prices worsened in May, new data said today, but retail sales were stronger than expected while industrial production growth missed consensus forecasts, as did fixed-asset investment.
Silver fell harder than gold, down alongside commodity prices such as iron ore and copper – which hit an 8-week low, down 15.0% from mid-May's new all-time copper high – after the People's Bank of China left its key interest rates unchanged for the 10th month in a row. 
With the giant GLD gold ETF reporting 1.2% investor outflows last week, the price of gold in US Dollar terms today slipped 0.6% to $2319 per Troy ounce, halving Friday's rally even as European equities extended their losing streak after France's CAC40 tumbled by more than 6% last week, its worst drop in over 2 years.
That sell-off wiped €150 billion off the Paris stock market following President Macron's shock decision to call a snap election following his party's defeat in European Parliament voting.
Gold priced in Euros today fell 0.8% from end-Friday's 1-week high to €2164, paring a third of last week's rebound, while the UK gold price in Pounds per ounce edged lower by 0.5% to £1830 ahead of Thursday's Bank of England decision on interest rates.
Gold prices on the Shanghai Gold Exchange had in contrast edged higher overnight to a 1-week high of ¥547 per gram.
But the Shanghai premium to London quotes – effectively the incentive offered to importers buying gold abroad and bringing it into the metal's No.1 consumer market – fell to a 1-week low of $26 per Troy ounce, signalling softer domestic demand.
Chart of Shanghai gold prices. Source: BullionVault
Previously averaging about $8 per ounce, the Shanghai gold premium rose to an all-time high of $120 in September 2023 after Beijing restricted private-sector bullion imports.
The premium then rose again, back above $50 this April, as the precious metal's continued surge to new all-time high gold prices drove up Chinese investment demand in the world's 2nd largest economy.
Following that peak, China's wholesale gold demand "experienced its weakest May since 2020 – when demand was affected by the Covid pandemic," says Ray Jia, research head for China at the mining industry's World Gold Council.
End-user demand withdrew 82 tonnes of gold from the Shanghai Gold Exchange's approved warehouses in May, down by more than 1/3rd from April's 131 tonnes and "34% below the 10-year average," according to Jia.
"Nonetheless, due to demand strength earlier this year, gold withdrawals have totalled 736 tonnes so far in 2024, 35 tonnes higher year on year" even as new record prices.
In contrast, and after Chinese gold ETFs grew for the 6th month running in May to a new record size, the giant SPDR Gold Trust listed in New York and vaulting bullion in London and the USA (NYSEArca: GLD) on Friday shrank by 4.0 tonnes, taking its weekly outflow to 10.3 tonnes – the sharpest shareholder liquidation since the first week of the New Year.
That left the GLD needing only 10.2 tonnes more than March's near 4-year low of 815.1 tonnes to back its shares in issue.
World No.2 gold-backed ETF the iShares gold product (NYSEArca: IAU) meanwhile held unchanged in size last session at its smallest since March 2020, needing 1.7 fewer tonnes of bullion to back its value across the week, the biggest decline in a month.
France's current Finance Minister Bruno Le Maire joined President Emmanuel Macron in warning against voting for Marine Le Pen's Eurosceptic National Rally – saying that the Eurozone's second-biggest economy faces the risk of a financial crisis if the far right wins with their heavy spending plans and VAT tax cuts.
British opinion polls meanwhile point to "electoral extinction" for the UK's ruling Conservative Party at the 4th July General Election as Keir Starmer's Labour Party shows its biggest lead since the brief and disastrous Government of Prime Minister Rish Sunak's predecessor, Liz Truss, whose unfunded tax cutting plans triggered a crisis in the Gilts market.
Prices for silver, which finds nearly 60% of its annual demand from industrial uses, fell faster than gold, down by 1.1% to $29.23 per ounce.
iShares' giant silver ETF trust (NYSEArca: SLV) expanded by 2.2% last week, the biggest weekly inflow in 7 to the largest holding in 2 months.

Atsuko Whitehouse is the Head of the Japanese Market at BullionVault and the Editor of Japanese GoldNews.

See all articles by Atsuko Whitehouse here.

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