Lower Gold Prices May Encourage Retail, Chinese Buying
Gold prices below $1,200 an ounce appear to be leading to more demand from China and also could encourage price-sensitive retail coin buyers, says HSBC. “As Western investors still appear to be negative on gold, based largely on the strength of the U.S. dollar, it is becoming clear that prices below USD1,200/ounce have stimulated greater demand from China,” the bank says. “Increases in the Shanghai premium and greater demand for kilo bars may be beginning to provide the beginning of a near-term floor for gold prices. Should heavy investor liquidation recommence, Chinese merchants may step back temporarily and prices could take another dip lower, but we expect that greater emerging-market demand would accompany further price declines.” Meanwhile, the bank points out that the U.S. Mint sale of gold coins rose 22.1% month-on-month in October to 88,500 ounces, also helped by softer prices. With gold falling below $1,170 at end of the month, “this may encourage price-sensitive retail investors to step in as buyers, in our view,” HSBC says. |
