Chinese shoppers, investors losing their appetite for gold

Bloomberg

China’s shoppers and investors lost their appetite for gold this year — and there’s little expectation of any major improvement in 2020 as slowing growth and higher prices crimp consumer spending.
Jewellery consumption is forecast to drop 4% to about 660 tons this year, according to forecasts from Metals Focus Ltd, while a decline of more than 20% to around 240 tons is seen for investment demand.

Down But Not Out
Slowing growth and concerns over the trade war have hit consumer sentiment and a rally in prices is keeping some investors away, said Nikos Kavalis, a director at the London-based research firm.
He expects demand to stabilise next year.
Economic growth in the world’s biggest gold consumer is sputtering. The official forecast of 6% to 6.5% is the slowest on record, and the 6.2% pace reported in the second quarter is the weakest since the government began releasing data in 1992.
“The economic conditions in the country are throwing a spanner in the works and that’s keeping jewellery consumption under pressure,” said Kavalis. The prolonged trade war and soaring local food prices have crimped consumer spending for discretionary products, he said.
Signs of progress in US-China trade negotiations lifted US equities and sent Treasury yields higher, though sentiment may be capped as investors voiced skepticism on the accord.
Another factor hurting demand has been the weaker yuan. While Chinese shoppers may be shying away from buying gold, investors worldwide are piling in to bullion. That’s pushed spotprices up 16% this year after hitting $1,557.11 an ounce last month, the highest in more than six years.
“Back in 2017 and 2018, you had a boost in demand from more sophisticated type investors buying gold as a hedge against RMB depreciation,” said Kavalis. “Following the rise in the gold price that we’ve seen in the summer, it looks like there is less of that because now a lot of these investors are also worried that the gold price is looking rich.”