Gold in China Trades at Second-Highest Premium on Record Amidst Market Volatility
Gold in China has surged to trade at the second-highest premium on record against the international benchmark
by Emmanuel Ellerbee
Gold in China has surged to trade at the second-highest premium on record against the international benchmark, as mainland markets reopened following the Golden Week holiday. The Shanghai spot price was over $112 per ounce higher than prices in London on Monday. This significant gap between the two markets has only been wider once before, when Chinese prices traded at a premium of over $120 in September due to shipping restrictions imposed by Beijing.
The international benchmark experienced a decline last week as global bond sell-offs put pressure on the metal. This further amplified the disparity between the Shanghai and London markets. Investors have been closely monitoring the Shanghai Gold Exchange in recent weeks, as volatility has been heightened. Just before the market closed for the holiday, prices suddenly dropped, but authorities reportedly issued a new round of import quotas to ease tightness in the local market and meet robust consumer demand.
Despite the market fluctuations, gold in China rose by as much as 2.7% on the Shanghai Gold Exchange on Monday, signaling persistent appetite for the precious metal. This increase surpassed the gain of 1.2% seen in the international benchmark, which was driven by haven buying following the Hamas attack on Israel.
According to Bloomberg economists David Qu and Chang Shu, many Chinese buyers are turning to gold as a safe-haven investment amid a weakening currency and an increasingly uncertain economic outlook.
Overall, the significant premium in the Chinese gold market indicates strong demand and reflects the current market dynamics amidst global economic uncertainties.
Definitions:
1. Golden Week: A Chinese national holiday that usually takes place around the beginning of October, during which Chinese markets are closed.
2. Shanghai spot price: The price of gold traded on the Shanghai Gold Exchange.
3. International benchmark: The reference price of gold in international markets, often based on London Bullion Market Association (LBMA) rates.
4. Haven buying: The act of purchasing safe-haven assets, such as gold, during times of economic or geopolitical uncertainty.
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