Gold prices are down almost 2% this morning (over $25) as last night's slowdown in Chinese money-supply growth and fears that China's insatiable gold demand has become less insatiable send the barbarous relic back towards $1300. Slowing GDP expectations, increasing restrictions on shadow-banking commodity-backed financing, and a need for liquidity are all factors weighing on the precious metal this morning.
China's appetite for gold is waning after a decadelong buying spree, suppressed by the country's economic slowdown and constrained credit markets.
Demand in the world's biggest gold consumer is likely to stay flat in 2014, according to estimates from the World Gold Council. Gold demand in China has expanded every year since 2002, when it declined, according to the industry group, whose forecasts are closely watched in the gold market.
Chinese consumption has helped to underpin gold prices since 2001, when many price and trading restrictions were relaxed. Last year saw frenzied buying as Chinese investors and jewelry buyers sought to capitalize on low prices. Chinese demand jumped 32% in 2013, vaulting the country past India to first place in the rankings of the world's gold consumers. But it is unlikely that record pace can be maintained, even if prices turn lower, according to the World Gold Council.
"We're looking at best for it to be on par with 2013," said Albert Cheng, managing director for the Far East at the World Gold Council. The council is releasing its latest report on China's gold market Tuesday.
Although the report doesn't offer a figure for estimated Chinese gold demand this year, it says 2014 will be a year of consolidation. "Chinese consumers brought forward jewelry and bar purchases, which may limit growth in demand in 2014," the report said.
"We're not seeing the kind of crazy buying we saw last year," said store manager Karone Huang. Last year, "we couldn't even fill our orders fast enough. That's how busy we were."