Since September, domestic gold prices in China have been on a noticeable uptrend, with Shanghai gold reaching its historical peak and the price of gold jewelry also rising.
"On September 12, the price of gold was 599 yuan/gram, excluding craftsmanship fees," a sales associate from a Chow Tai Fook store in Beijing told Interface News. "A few days ago, the price was even higher at 605 yuan/gram."
Data from Jintou.net shows that other stores, such as Lao Feng Xiang, Kin Luen, Chow Tai Sang, and others, still have gold prices above 600 yuan/gram.
Recently, domestic gold prices have generally risen. As of the close on September 12, Shanghai gold closed at 466.76 yuan/gram, down 0.02% from the previous day, but up more than 2% from early August. The previous day's intraday high even reached a historic peak of 467.94 yuan/gram.
In contrast, international gold futures prices have been on a downward trend. As of 19:30 Beijing time on September 12, COMEX gold, or New York gold, was priced at $1937.3/ounce (equivalent to about 454.17 yuan/gram), down about 3.3% from early August.
Currently, domestic gold prices are about 13.77 yuan/gram higher than international prices.
Data from Southwest Futures shows that a gold price difference between domestic and international markets of -9.566 yuan/gram to 10.937 yuan/gram accounts for about 90% of the entire statistical range. This means that the current price difference is quite unusual.
This is mainly influenced by fluctuations in the RMB exchange rate.
Under normal circumstances, when the RMB depreciates, domestic gold performs better than international gold. When the RMB appreciates, domestic gold underperforms compared to international gold.
Southwest Futures pointed out that the correlation between Shanghai gold/COMEX gold and the spot exchange rate is nearly 90%. The difference in gold prices between the domestic and international markets is calculated as the Shanghai gold price minus the New York gold price divided by 31.1035 times the RMB exchange rate (yuan/gram).
The trend in international gold prices is generally negatively correlated with the U.S. dollar index. That is, when the dollar rises, gold falls, and vice versa.
Analysts from Meirya Futures pointed out that last week's better-than-expected U.S. non-manufacturing Purchasing Managers' Index (PMI) and resilient wage growth drove U.S. inflation expectations significantly higher. This, combined with hawkish signals from Federal Reserve officials regarding the economic outlook, led to a continued rise in the U.S. dollar index, nearing its March peak, with a weekly increase of 0.78%. U.S. bond yields and real interest rates continued to rise, causing COMEX gold prices to fall below the $1950/ounce mark.
In August, the U.S. ISM non-manufacturing PMI unexpectedly recorded 54.5%, exceeding the expected 52.5% and higher than July's 52.7%, marking a new high since February of this year. As of the week beginning September 2, the number of people applying for unemployment benefits in the U.S. was less than expected at 216,000, with an expected value of 234,000 and 229,000 in July. This, to some extent, indicates the resilience of the U.S. economy, especially the service sector.
The U.S. dollar index and U.S. bond yields were boosted by improved data, thus maintaining high volatility. The U.S. dollar index broke through the 105 mark last week, and the RMB exchange rate continued to depreciate, causing a divergence in gold prices between domestic and international markets.
Last week, the U.S. dollar to RMB exchange rate rebounded from 7.24 to 7.34, with a rebound of more than 1%, marking a new high since 2008. As of September 12, the exchange rate has recovered to 7.29.
Apart from exchange rate factors, strong domestic gold demand in China also supports gold prices.
Domestic gold demand in China can be roughly divided into consumer demand, reserve demand, and investment demand. Among them, the consumption of gold jewelry accounts for a large proportion, which means that domestic gold prices are greatly influenced by the consumer market.
Data from the China Gold Association shows that in the first half of this year, the national gold consumption was 554.88 tons, a year-on-year increase of 16.37%. Among them, gold jewelry accounted for 368.26 tons, a year-on-year increase of 14.82%, accounting for more than 60% of total consumption; gold bars and coins reached 146.31 tons, a year-on-year increase of 30.12%.
The aforementioned sales associate told Interface News, "Recently, it's the Mid-Autumn Festival and National Day holidays, and there are more purchases of 'three gold' for weddings."
From a reserve perspective, data disclosed on the central bank's official website shows that as of the end of August, China's gold reserves reported 69.62 million ounces (about 2165.43 tons), an increase of 930,000 ounces (about 28.93 tons) from the previous month. This is also the tenth consecutive month that the central bank has increased its gold reserves.
Guosheng Futures stated that in the medium to long term, gold's safe-haven properties will gradually become prominent as economic downturn pressures intensify. The global central bank's trend of increasing gold holdings is expected to continue.
The support of jewelry consumption is still expected to continue. The World Gold Council pointed out in its Q2 review and trend analysis of the Chinese gold market that various industry events are about to be held, retailers will be more proactive in restocking, and the traditional gold jewelry sales season related to holidays is also expected to support gold jewelry demand in the second half of the year. The second half of the year is also China's wedding peak season, and the demand for wedding gold jewelry will continue to boost gold retail consumption.
Hualian Futures stated that it is expected that the U.S. economy may fluctuate, and international gold prices will continue to maintain a weak oscillation; under the conditions of weak supply and strong demand and the RMB exchange rate factor, Shanghai gold will still be dominated by strong oscillations in the short term.
