Source: JPMorgan |
But as prices fell, the declining demand from ETFs and other
investment products (such as hedge funds) was to some extent
offset by demand from Asia. China has ramped up imports
materially this year. Moreover, as the nation's economic
growth stastabilizes, the demand should remain robust.
SMM: - On a net basis, China’s gold imports from Hong Kong totaled 113 tons in July this year, more than double net imports of 46 tons in July last year.
“Physical gold demand in China has clearly picked-up in July after gold prices hit the year-to-date low of $1,181/oz on June 28. This increase in demand helped contributed to bullion’s price recovery to over $1,300/oz at the end of July,” the bank added.
“More recently, bullion’s premium on the Shanghai Gold Exchange, an indicator of demand, has softened to low double digits from the $20-30/oz range seen in July and August, they continued.
“However, the recent pull-back in gold prices sub $1,400/oz level may be an encouraging sign for price sensitive physical buyers to step back into the market. That said, China’s gold imports may remain at elevated levels for the medium term, in our view,” the firm concluded.
India's imports rose 45% in the first half of the year, and
in spite of the recently imposed controls, demand by jewelry
manufacturers remains strong. Once these controls are
lifted, the inventory rebuild will commence. Other nations
such as Turkey, Pakistan, Saudi Arabia, UAE, and even
Vietnam are continuing to generate demand. This offsets some
of the volatility created by financial sellers and in effect
acts as a floor on price. As price declines, physical (as
opposed to financial) buyers in Asia enter the market in
size.
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