Chinese Were Sellers of Gold After Holiday

Chinese investors sold into gold’s rally after returning from a week-long holiday, a sign they do not expect prices to go much higher and cannot be counted on to support the market with post-Lunar New Year demand set to falter.

A lack of buying interest going forward from top consumer China could cut short this year’s rally in gold, one of the biggest in years, with the metal up nearly 14 percent since the beginning of 2016.

Chinese selling helped push gold down more than 2 percent on Monday.

“In China, people think that the rise of the gold price is driven by a safe-haven effect,” said Shu Jiang, chief analyst at Shandong Gold Group in Shanghai, noting that usually such rallies are not long-lived.

“People have reservations about such a rise.”

Consumers in China, along with those in No.2 buyer India, typically purchase gold in jewelry form, hunting for bargains when prices dip or if they are confident of a sustained rally.

Bullion dealers across Asia said the Chinese were offering gold on Monday, looking to book profits with prices about $60 an ounce higher than they were before their week-long holiday.

“They bought a lot of gold when prices were in $1,000s and $1,100s, so now they are selling,” said a dealer in Hong Kong. “Below $1,200, they will be buyers again.”

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza