The global pandemic froze the Chinese golden market due to the decline in demand for the product. Chinese buyers were the most sought-after consumers of gold, but investors have been eyeing safer industries leaving the gold market at a standstill.
China was the top buyers of gold bars, jewelry, and coins, but the national lockdown in the country significantly mitigated consumer activity in malls. According to the World Gold Council, Chinese consumers formed a fifth of the total global demand for gold at 4,356 tons in 2019.
The premium charged in buying gold in China evaporated this year. The industry is now facing a long road to recovery that even Beijing started to jump-start consumption with a campaign to promote consumer spending.
The gold market continues to struggle in China that could lead to price adjustments. Last month, the price for gold was set at 1,700 USD per ounce for the first time in seven years. The report also claimed that there would be slower retail consumption of gold in other territories as well.
Russia's decision to halt purchases mandated by its Central Bank affected retail consumption in India, Europe, and the US. According to the chief executive officer of the China Gold Association Zhang Yongtao, domestic demand for gold may recover soon, but such recovery would be slower than anticipated.
He added that China's retail sales of the metal product along with silver and jewelry declined by 41 percent for the first two months of 2020. He estimated that the amount of gold jewelry sold in the first quarter of this year would fall by at least one half from the values in 2019.
He also added that industry players must set up a contingency plan to cope with the significant decline for the rest of 2020. He claimed that consumers would not purchase the product until the pandemic ends. Additionally, he also suggested that investors would be unwilling to purchase gold with their deposits now.
The troubles in the gold market mirrored that of activity in the global market. Last week gold refines shut and the travel industry shut down. This created a massive squeeze of gold futures in New York. The report revealed that traders scrambled to get enough capacity to meet their commitments.
The Chinese economy also showed signs of recovery from the pandemic. About 90 percent of the country went back to normal business activity by the end of last week. Bloomberg Economics reported that consumers, however, remained hesitant after the government warned of the dangers of resumed business activity.
