Asian jewellery shoppers stock up on gold amid price slump
Gold price’s slump to near a nine-month low is drawing jewellery shoppers in Asia to hunt for bargains.
After a year of demand being in the doldrums, retailers are buying more of the precious metal to cater to people like Seema B, a 35year-old housewife who ventured to Zaveri Bazaar to get new bangles.
“The prices have come down a bit and the general worries about the virus have also eased.”
She joins others in India and Malaysia who are stocking up for weddings and investment. Retail investors in South Korea are amassing bullion while Chinese demand drove sales higher.
The demand for physical gold may stem the slide in prices that have been pummelled by rising bond yields and outflows from bullion-backed exchange-traded funds.
When financial investors aren’t buying, “the physical market becomes increasingly important in setting the floor for prices”, said analyst Suki Cooper at Standard Chartered Bank.
“The gold price floor is starting to look well cushioned.”
Spot gold dropped 0.9 per cent to US$1,729.60 an ounce on Monday. Earlier this month, it fell below US$1,700 to the lowest since June, prompting more buying from consumers who were deterred by prices reaching a record of US$2,075.47 in August.
Jewellers in India see the momentum lasting until the auspicious gold-buying day of Akshaya Tritiya in May.
A cut to the import duty has also made the precious metal cheaper in India, which imports almost all the gold it consumes. Early estimates show gold purchases surged to the highest since late 2019 in February.
In China, gold jewellery consumption is set to grow 28 per cent this year, with most of the bump in the first quarter as the post-Covid recovery runs out of steam and prices rally later in the year, Metals Focus said in a report earlier this month.
Jewellery sales at big urban retailers more than doubled during the Chinese New Year holiday compared with last year, according to Zhang Yongtao, secretary general of the China Gold Association. That has pushed the local market to largely trade at a premium since mid-January, which has not happened since February last year, said Cooper.
Bullion dealers say premiums on kilobars have also been increasing in Singapore, Hong Kong and Thailand since February.
That is likely due to the scrap market coming to a standstill after gold prices dropped, which meant refiners are struggling to get material to make enough gold bars, said Joshua Rotbart, founder and managing partner at J. Rotbart & Co.