India and China keep battling for the title
Historically, India has been the leader in gold imports. However, China had taken over the title during the past few years. In the third quarter of 2015, India reclaimed the title once again and is currently the biggest buyer of gold. India was importing record quantities when prices crashed to three-year lows in spring 2013. India’s government shut down legal imports in summer 2014. The price of the precious metal then moved sideways before rising.
Gold’s 12-year bull run ended in 2013 and prices suffered, which triggered massive selling of the related ETFs. China emerged as the savior, absorbing the flood of gold from the ETFs. India and China are close competitors for the title of number-one buyer. Together, the countries make up about 50% of the total global demand for the precious metal. The above chart shows India’s and China’s gold demand in 2015. India superseded China in the third quarter.
China and gold
Gold prices are impacted by overall consumer sentiment, which is determined by economic activity. As China is one of the principal actors in gold and silver markets, the economic growth and consumer sentiment in the Chinese mainland have impacted the prices of these precious metals. As the overall growth seemed bleak in China, especially after the currency devaluation, there was a steep fall in precious metal prices.
Not only precious metal prices have fallen. Mining equities such as Randgold Resources (GOLD), Yamana Gold (AUY), and Pan American Silver (PAAS) have fallen significantly since the start of the year. The three companies make up 10.6% of the VanEck Vectors Gold Miners ETF (GDX). Mining-based ETFs such as the Sprott Gold Miners ETF (SGDM) and GDX have fallen with the mining companies.