How does world gold price fluctuate due to China's heat of gold buying?

Over the past week, the world gold price has increased significantly. Recorded at 5:00 a.m. on March 29, 2024, Vietnam time, the world spot gold price was at 2,232.10 USD/ounce. This is equivalent to the record high gold price last week, in the context that the Federal Reserve (FED) continues to forecast three interest rate cuts in 2024.

People buy gold in China. Source: Chan Long Hei, Bloomberg.

However, more and more investors are doubting this forecast of the Fed, as the inflation situation in the US is hotter than expected. This makes many officials from the Fed more certain about the possibility of only two, or even just one, interest rate cuts this year. Since gold prices are usually inversely proportional to interest rates, uncertainty about the pace of interest rate cuts could weigh on gold prices in the coming months.

Speaking to The Wall Street Journal, a representative of market research company BMI Research said that the main drivers of world gold prices this year will be the US exchange rate, the value of the dollar and the global geopolitical situation. However, gold purchasing power in China may be an important factor that few investors expect.

According to the World Gold Council (WGC) 2023 report, the People's Bank of China has bought more gold than any other central bank in the world, with a total purchase of 225 tons. This is the largest increase in China's gold reserves since 1977, just as the country prepares to reform its economy . The hoarding of gold is also happening among pension funds, insurance companies and state-affiliated investment companies in China, although there is no official data on the amount.

Chinese stock traders are also buying gold miners and flocking to gold exchange-traded funds (ETFs). Assets under management in gold ETFs hit a record high in January, at $4 billion, according to the China Gold Association. Shares of Zijin Mining, one of China’s largest gold and mineral mining companies, closed at an all-time high on March 15.

China also imported about 367 tons of precious metals for non-monetary use in the first two months of this year, up 51% from the same period last year. Sales of gold products and gold jewelry in China also increased 24% compared to the same period last year during the recent Lunar New Year period. Economic concerns are also the reason why many domestic consumers are buying gold.

In an interview with The Wall Street Journal, John Reade, chief market strategist at WGC, said that the prolonged real estate crisis, the gloomy stock market and the unstable economy are the main reasons for the increase in demand for gold in China. With the yuan at its lowest level against the dollar this year, investors are encouraged to invest in gold, which is considered a safe investment channel in difficult times.

Many experts believe that this gold buying power in China has created the basis for the recent gold price increase. Mr. Nikos Kavalis, CEO of precious metals consultancy Metals Focus, told the Wall Street Journal: "I don't think Chinese demand is enough to push global gold prices higher. But if there is any major change in the gold market, strong gold demand from China will help stabilize prices."

World gold price fluctuation chart, recorded at 11:08 on March 29, 2024

At 2:00 p.m. on March 29, 2024, the world gold price increased sharply, at 2,233.48 USD/ounce, up 1.38 USD compared to the previous opening session. The price of gold futures for June 2024 on the Comex New York floor was at 2,254.80 USD/ounce.

Gold price at Saigon Jewelry Company Limited - SJC, at 2:00 p.m. on March 29, 2024

Domestically, at 2:00 p.m. on March 29, 2024, the SJC gold price listed by Saigon Jewelry Company Limited (SJC) was VND 79 million/tael for buying and VND 81 million/tael for selling.

SJC gold price at Bao Tin Minh Chau is traded at 79.35 - 81.25 million VND/tael, gold price increased by 350,000 VND/tael for buying and increased by 300,000 VND/tael for selling compared to the close of yesterday's session.

Gold rings also continued to increase following the world gold price. At Bao Tin Minh Chau, this morning, March 29, 2024, gold rings were still listed at 69.28 million VND/tael for buying and 70.48 million VND/tael for selling. According to Bao Tin Minh Chau, at business establishments, this morning (March 29), the number of customers buying and selling was 55% buying and 45% selling.

Giving advice to gold investors and people, some economic experts analyzed that, in fact, gold has always been a "savings" and not an investment channel with attractive profits. Although in certain periods, gold prices increase, they only increase in the short term and it is difficult to maintain this increase in the medium and long term. Therefore, investors and people should consider carefully before selling to make a profit, instead of holding for a long time.

Source: https://congthuong.vn/gia-vang-the-gioi-bien-dong-the-nao-truoc-suc-nong-trung-quoc-mua-vang-311587.html