Gold Down Today Under Mysterious Circumstances

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The Shanghai Gold Benchmark PM (SHAUPM) in RMB stayed virtually unchanged in February while the LBMA Gold Price AM in USD saw a mild fall of 0.3%. However, both RMB and USD gold prices gained momentum in early March, refreshing their record highs.

Last month saw 127t of gold leave the Shanghai Gold Exchange (SGE), above the ten-year February average (118t)

The local gold price premium remained elevated, supported by robust gold consumption and possible declines in supply due to a shorter working month

Chinese gold exchange-traded funds (ETFs) saw their third consecutive monthly inflow, adding RMB778mn (+US$109mn) and pushing their total assets under management (AUM) to another record high of RMB31bn (US$4.3bn)

Official gold reserves in China have now risen for 16 consecutive months; the addition of 12t in February pushed their total to 2,257t – 4.3% of the country’s foreign exchange reserves.

Looking ahead:

In the near term, more working days in March and improved replenishing activities – as inventories stocked before the Chinese New Year (CNY) holiday are depleted – should support a m/m rebound in wholesale gold demand

But the gold price rally – especially as it reached new highs recently – combined with the fact that we are entering the off-season for gold consumption may exert pressure on local gold consumption over the coming months.

As a counterbalance, the same price action may continue to support investment demand for gold

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