Chinese Pay $18 or 1.3% Premium to Buy Gold as Inflation, Currency Hedge
Today’s AM fix was USD 1,386.00, EUR 1,050.56 and GBP 884.27 per ounce.
Friday’s AM fix was USD 1,368.25, EUR 1,042.24 and GBP 877.87 per ounce.
Gold climbed $19.80 or 1.45% Friday, closing at $1,388.50/oz. Silver surged $0.60 or 2.59%, closing at $23.81. Platinum rose $13.60 or 0% to $1,495.70/oz, while palladium climbed $9.65 or 1.4% to $695.45/oz.
Gold fell 0.42% and silver gained 1.62% last week.
Gold rose in Shanghai on the open and gained 1.2% to 277.15 yuan per gramme prior to aggressive selling capped price gains. Gold inched down in London and the belief that the Fed will announce a reduction in quantitative easing at their policy meeting next week may be leading to weakness.
After peculiar selling, gold bungee jumped higher on safe haven buying on Friday after U.S. economic data highlighted that employers added fewer jobs than expected in August showing the very anaemic state of the U.S. economy.
A Bloomberg survey showed an average of 34 economists believe the U.S. Fed will reduce bond purchases from $85 to $75 billion per month next week. However, whether the Fed tapers or does not taper is far less important than the fact that monetary policies are set to remain extremely loose for the foreseeable future which will support gold.
Concerns about inflation and weakening currencies are leading the Chinese middle classes and wealthy to again use gold jewellery, coins and bars as a hedge and store of value.
Store of wealth buyers in China today were paying a $18 per ounce premium or 1.3% premium over COMEX gold (see table below). In recent weeks they have been willing to pay as much $30 per ounce extra for gold.
The Chinese people are concerned that the same massive inflation that is affecting India, Indonesia, Brazil and other emerging markets may eventually reach China.
Jewelry, coin and bar demand and Shanghai trading volumes have all surged again in 2013 and China is on track to surpass India as the world's largest buyer of gold this year.
With over 50% of family offices employing a strategic asset allocation to gold it remains to be seen how those with no allocation take a lead from the continuing rise in Chinese imports.
Throughout the world, those more aware of the historical record regarding paper currencies, and their dismal record at preserving wealth, continue to accumulate physical bullion.
The currency devaluations being seen in emerging markets in recent months are but a taste of similar devaluations which will be seen with regard to all paper currencies,in the coming years.
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