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A Deeper Look at Demand from China

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Nov. 1 2015, Updated 2:41 p.m. ET

Demand from China

China’s gold demand saw a rise in the third quarter of 2015. However, the demand was small enough that China’s position as the leader in demand for gold was overtaken by the former leader, India. The overall total demand saw a rise of ~7% compared to the same quarter last year. Dollar gold prices, in contrast, were nearly 12% lower on average in the third quarter compared to the same quarter last year.

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Price chart

Above you can see a price chart for the price of gold and the US dollar represented by the DXY Currency. The DXY Currency is a basket encompassing six major world currencies that are the Swiss franc, euro, pound sterling, Japanese yen, Swedish krona, and Japanese yen. The price of the US dollar is derived against these currencies.

The GFMS reports

According to reports by the specialist GFMS (Gold Field Mineral Survey) analysts at Thomson Reuters, the sales of physical gold—both as jewellery and bars—streamed upwards immediately after the gold price breached $1100 in mid-July. Imports of gold into mainland China through Hong Kong rose to a 10-month high in September.

The extended demand from China would also be likely due to the devaluation of the home currency in August. Gold is often resorted to as a haven asset. The spiking upheaval in the Chinese economy likely prompted investors to opt for gold.

All the precious metals have seen a rise in October. The positive returns are also followed by the precious metal mining ETFs like the Direxion Daily Junior Gold Miners Bull 3X ETF (JNUG) and the Global X Silver Miners ETF (SIL). The mining equities that saw a positive return on a 30-day trailing basis include Alamos Gold (AGI), B2Gold (BTG), and Aurico Gold (AUQ). These companies make up 3.3% of the VanEck Vectors Gold Miners ETF (GDX).

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