Why China’s physical gold demand is a key indicator to watch

Anuradha Garg - Author

Aug. 18 2020, Updated 4:39 a.m. ET

World’s largest gold market

In 2013, China became the world’s largest gold market. It accounts for around a third of the global gold demand. World Gold Council (or WGC) expects demand to grow at least another 20% by 2017.

Investors need to monitor physical gold demand trends in China because of its sheer size. It impacts gold demand and gold prices. Click here to learn more about the fundamentals that are driving the demand for physical gold in China.

Imports from Hong Kong increased marginally in August

China doesn’t publish gold import or export data. As a result, we’ll rely on the data from Honk Kong’s gold exports to China. The Hong Kong Census and Statistics Department releases the data every month.

Total imports from Hong Kong increased marginally to 25.58 tons in August—from 21.05 tons in July. This was a three year low. The imports for August declined 76.8% year-over-year (or YoY).

The import pace decreased steadily since February. It’s down 34% year-to-date (or YTD) compared to last year. One possible explanation for this drop could be the Chinese government’s crackdown on metal financing deals.

The lower demand appetite for world’s largest consumer is negative for gold prices. It’s also negative for gold-backed exchange-traded funds (or ETFs)—like the SPDR Gold Shares (GLD).

It’s negative for gold stocks like Goldcorp Inc. (GG), Barrick Gold Corp. (ABX), Newmont Mining Corporation (NEM), Kinross (or KGC), Yamana Gold (AUY), and ETFs—like the Gold Miners Index (GDX).

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