Gold hit as Chinese demand drops

Gold is off 0.7% as a weak Chinese yuan has led to a drop in imports from Chinese customers.

Gold is trading at $1293, down 0.7% as the soft yuan has impacted the level of gold imports into China, which is a major import of the precious metal. The yuan has lost over 3% versus the US dollar year-to-date and since gold is listed in US dollars it has made the yellow metal relatively more expensive to buy for clients based in China. Some traders were speculating that the People’s Bank of China was behind the decline in the yuan; if the currency pulls back some of its losses, we could see gold head towards the important $1300 level.

Gold is currently below the 200-day moving average of $1294. This is a worrying sign although, as I mentioned previously, if violence were to escalate in Ukraine we could easily break through the $1300 mark. Equity markets have been strong lately as traders have been moving their cash from safer assets like gold to riskier assets like stocks. We could see a reversal of that if uncertainty in Ukraine increases.

Spot gold chart

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.