China’s Consumption of Gold and Acquisition of Gold Mines Continues

Today’s AM fix was USD 1,429.75, EUR 1,102.52 and GBP 931.19 per ounce.  
Friday’s AM fix was USD 1,449.25, EUR 1,114.12 and GBP 941.62 per ounce. 

Cross Currency Table – (Bloomberg)

Gold fell $12.90 or -0.89% on Friday to $1,443.30/oz and silver finished with a gain of 0.42%. Gold and silver both traded down for the week at -1.76% and -1.25%.

The downward pressure on the gold price emanated from Comex where gold futures were off 1.9%. 

Driving the sentiment was the report that U.S. jobless benefits decreased to their lowest rate since 2007. Philadelphia Fed President Charles Plosser forecasted that day unemployment will drop to 7% by December 2013 and he favours reducing the Fed’s $85 billion monthly bond purchases next month. Plosser however has no vote on Fed policy this year.

While hedge funds are seeing outflows of $20.8 billion from gold funds this year, BlackRock Inc. the world’ biggest money manager is still bullish, reported Bloomberg.

Gold in Dollars, 1 Year – (Bloomberg)

Asian countries are seeing unprecedented demand for the yellow metal after the dip in prices in April.

India imported $7.5 billion of gold bullion in the last month up from $3.1 billion a year earlier. The country’s trade deficit widened 70% with the increase in gold and silver imports.

Gold in Euros, 1 Year – (Bloomberg)

Analysts at Sprott Group highlight that China is using its gold import data to elevate import statistics even though the precious metal should not be classified with imports since they are not used for “goods and services” but rather primarily as investments.

The golden boost to the imports data has led some analysts to conclude that the Chinese manufacturing sector is strong. According to the Bejing Daily Newspaper, Chinese housewives or “aunties” have purchased 300 tons of the yellow metal in the past three weeks amounting in nearly $16 billion.  The impact of the run on physical gold in China may have a significant effect on import statistics.

Recently, China National Gold, a state-owned miner, was in talks to purchase Barrick Gold’s 74% stake in African Barrick, a major gold producer in Tanzania.

Although the deal has been shelved it shows China’s desire to acquire more mines. The Chinese purchased Norton Gold Fields in Australia last year for $240 million and in mid April bid for Kalgoorlie Mining Co.  Even with the price drop the Chinese saw the price for Barrick as too steep.  

China is the world’s largest producer of gold.