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Commodities

Local gold market rises 6 per cent on first trading day of Year of the Monkey

Investors see gold as safe bet amid stock market slump

PUBLISHED : Thursday, 11 February, 2016, 7:36pm
UPDATED : Thursday, 11 February, 2016, 7:36pm

Hong Kong and international gold markets rose on Thursday, with investors seeing gold as a safe bet amid slumping stock markets.

The Hong Kong gold market traded at the Chinese Gold and Silver Exchange Society rose on the first trading day of the Year of Monkey to close at HK$11,248 a tael at 5pm, up HK$630 a tael, or 5.93 per cent from Friday.

Yuan-denominated gold bars traded at 252.95 yuan per gram at 6pm on Thursday, up 15.16 yuan, or 6.23 per cent from Friday. The yuan-demominated gold trades electronically until 5am.

The US gold market traded at about US$1,192.96 an ounce on Thursday, close to a seven-month high of US$1,200, after US Federal Reserve chairwoman Janet Yellen indicated there would be only “gradual” adjustments to monetary policy.

Local gold bourse president Steven Chan said he expected the gold price would rise to US$1,300 an ounce, from last year’s trading range of US$1,000 to US$1,200 an ounce.

“The weak economies worldwide will mean US will slow down its pace in increasing interest rates in the first half of the year,” Chan said as he hosted the opening ceremony of the first gold trading day in the Year of the Monkey. “Japan and Europe are still keeping their interest rates low. These factors will help keep the gold price up.

“In addition, stocks, funds, futures and bonds have all been performing badly, which will also help boost the price of gold.”

China remained the world’s largest gold buyer last year, buying 985 tonnes, followed by India on 849 tonnes. Their buying accounts for 45 per cent of global demand, according to a World Gold Council report released on Thursday.

Chinese consumers increased their demand for gold coins by 25 per cent in the fourth quarter as they wanted to hedge against the depreciating yuan, the report said.

“The yuan has devalued by 3.1 per cent against the (US) dollar in the fourth quarter, a result of the People’s Bank of China giving the market a (slightly) freer rein in determining the value of the yuan, and market concerns over a faltering economy,” it said.

“Concerns over the stock market gave added impetus, as both Shanghai and Shenzhen stock market indices met with heavy resistance ... the exodus from equities has played to gold’s advantage over recent weeks, as have investment purchases related to the incoming Year of the Monkey. Banks and retailers are confident that physical demand will remain healthy throughout 2016 as wealth protection tops the list of requirements for retail investors.”

The People’s Bank of China and other central banks were also key buyers of gold last year. They bought 588.4 tonnes of gold last year, more than the 583.9 tonnes in 2014 and only trailing the record high of 625.5 tonnes in 2013.

“Central banks added to their gold reserves with renewed vigour in the second half of 2015, accelerating their purchasing programmes as diversification of foreign reserves remained a top priority,” the Wold Gold Council report said.

“Economic and geopolitical risks continue to worry global markets, and early events in 2016 make clear that reserve management – particularly diversification away from the US dollar – remains essential. Central banks are keeping their foot firmly on the gold purchasing pedal.”

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