New | Chinese unmoved by slump in gold to 4-year lows, prices seen dipping further

Even with gold prices dropping to near four-year lows, buyers in China - the world’s leading market - are not tempted, suggesting prices have further to fall.

When gold prices are in a slump, Chinese buyers, eyeing a bargain, traditionally move in and stop the rot. But that doesn’t seem to be happening this time around. The current market decline has seen the price of gold lose more than a third of its value in two years, to around US$1,170 an ounce.

Unusually, prices on the Shanghai Gold Exchange, the world’s biggest platform for physical trade, are at a discount of around $1 an ounce to the global benchmark, slipping from premiums of $1-$2 an ounce last week. Since all physical gold trade in China goes through the exchange, it is seen as a reliable barometer of Chinese demand.

World gold prices are at their lowest since 2010 and slid $25 an ounce on Friday as the US dollar strengthened, but Chinese buyers are still not biting, anticipating that prices have further to drop.

There is little sign of increased demand, dealers at importing banks in China and traders told Reuters on Monday, recalling how China led a rush to buy jewellery and gold bars and coins when prices slumped about $200 an ounce in two days last year.

"We’ve not seen any significant physical demand on the back of this (price drop)," said Victor Thianpiriya, an analyst at ANZ in Singapore. "That’s a worrying sign for prices as Chinese buying was really the only thing supporting the market on sell-offs last year."

"I rushed in to buy gold coins last year when prices fell, thinking that it was a good bargain and that prices would surely rebound. But it was clearly a wrong bet and I’m still down 15 per cent," said 42-year-old gold investor Chen Xilong. “The question for me now is whether I should cut my losses and sell the gold I have."