Update on gold indicators for investors: Brace for more pain (Part 14 of 20)
World’s largest gold market
In 2013, China became the world’s largest gold market. It accounts for about a third of global gold demand. The World Gold Council (or WGC) expects demand to grow by at least another 20% by 2017.
Because of China’s sheer size, investors need to monitor physical gold demand trends in China. It impacts gold demand and gold prices. Learn more about the fundamentals that are driving demand for physical gold in China.
Imports rise for third month in a row
China doesn’t publish gold import or export data. As a result, we’ll rely on data from Hong Kong’s gold exports to China. The Hong Kong Census and Statistics Department releases data every month.
Net imports from Hong Kong totaled 69.0 tons in October against 61.7 tons in September and 129.9 tons a year earlier. Increasing jewelry sales countered weak investment demand.
Physical buying and gold prices
Strong physical demand from the world’s largest consumer provides support for the gold price. Physical buying from China and India came to the rescue of falling gold prices in 2013 when ETFs were on a selling spree. Though the extent of buying is lower compared to last year, it should support gold prices and hence gold-backed ETFs such as the SPDR Gold Shares (GLD).
It should also be positive for gold stocks such as Goldcorp Inc. (GG), Barrick Gold Corp. (ABX), Newmont Mining Corporation (NEM), Kinross Gold Corporation (KGC), and Yamana Gold (AUY), as well as ETFs such as the Gold Miners Index (GDX).
Browse this series on Market Realist: