Gold Demand Remains Weak

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Gold Demand Remains Weak

Gold Demand Remains Weak In China - Commerzbank

recent report from the China Gold Association shows demand remained weak in China during the first three quarters. Looking ahead, Commerzbank believes the demand for Gold is unlikely to increase in the coming months.

Over the period of 12 months, around 40 tons of Gold were purchased by the People's Bank of China. Also, the overall demand was around 683 tons, which is a decline of 8% from the previous year.

Higher Gold Prices Dampen Demand

The key reason for this was the weaker demand for jewelry in China. As per the data, the demand for jewelry declined by 32.5% and was recorded at 270 tons. The higher prices of Gold were mainly to blame for the weaker demand, as consumers are not willing to pay a premium right now.

In the next few quarters, the situation will remain the same as Commerzbank doesn't expect a recovery in jewelry demand.

In addition, the government will also put additional taxes on the purchase of Gold jewelry. So, that's also something that will keep the Gold demand weak in China.

However, an increase was seen in the demand for gold coins and bars. As per the data, the demand was recorded at 352 tons, which is an increase of 24.5% from the previous year.

The Gold bars and coins also accounted for almost 50% of the total Gold demand in the country. In addition, the Chinese central bank also continued to buy Gold, but the quantity has declined due to higher prices.

The overall situation reveals that higher Gold prices are the key reason for weaker Gold demand. In the next 12 months, the purchases from PBoC and even the consumers will remain weak if Gold prices remain high.

However, a decline in the Gold prices will once again reignite the demand for Gold in China. Once that happens, the PBoC is also likely to ramp up the buying of Gold bullion.

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