Dealers in top consumer China offer steep discounts as demand slumps

Physical gold demand in China continued to be in the doldrums this week as the coronavirus-led restrictions stalled activity, with dealers in the top consumer offering massive discounts.

Traders and dealers quoted massive discounts of about $50 to $70 over benchmark spot prices in China, the biggest on record as per data going back till 2014.

“In the short term, until the coronavirus disappears, I don’t see any physical demand in China,” said Peter Fung, head of dealing at Wing Fung Precious Metals.

Spot gold prices traded between $1,672.69 and $1,746.50 an ounce this week, a peak since 2012.

“I heard jewellery stores stocked up in January so they’re now stuck with all of that and this week, could be more interested in selling for cash,” said Samson Li, a Hong Kong-based precious metals analyst at Refinitiv GFMS.

The Hong Kong market, however, did exhibit some signs of steady activity, with premiums around $0.50-$1.00.

“We resumed operations so we’re getting better but on the economy side, most shops are still closed,” said Dick Poon, general manager at Heraeus Metals Hong Kong Ltd.
Singapore saw premiums of $1.50-$3 an ounce, although restrictions strained supply and reduced retail activity, traders said.

“Bullion sales remain very high as clients scramble to protect their wealth in physical gold and silver amidst the crisis in the real economy,” said Vincent Tie, sales manager at Silver Bullion, adding customers were opting for online purchases.

Singapore’s annual exports growth accelerated in March, driven by a jump in shipments of pharmaceuticals and gold.

However, high premiums on retail gold has slowed physical demand, said Spencer Campbell, director at Precious Metals Consultants SE Asia Consulting in Singapore.

In the world’s second biggest bullion consumer, India, an extended lockdown kept physical gold trading suspended while local prices soared to a record.

“Bullion industry is not expecting any kind of respite from the lockdown in near future,” said a Mumbai-based dealer with a bullion importing bank.

India’s gold consumption in 2020 could fall as much as 50% from last year as the lockdown has closed jewellery stores during key festival and wedding seasons.

Japan, which also recently declared an emergency due to the outbreak, saw premiums of $0.50-$1.00 an ounce, a Tokyo-based retailer said, adding supply constraints led to a slight rise in premiums from last week’s $0.50 level.

Meanwhile, in Thailand, cash-strapped citizens rushed to sell gold in Bangkok’s Chinatown as prices in the Thai baht surged to an all-time high this week.