- Supported by the low rate environment and concerns for global economic growth, gold prices rose for the fourth consecutive month in June. While the LBMA Gold Price AM in US dollars reached the highest level in eight years during the month, the Shanghai Gold Benchmark PM (SHAUPM) in renminbi (RMB) set a new record at 399yuan/gram1
- Accommodative fiscal and monetary policies continued to drive China’s economic revival in June, but in turn the nation’s money supply grew rapidly
- Au(T+D) and gold-backed ETFs have grabbed Chinese investors’ attention during the first half:
- Au(T+D)’s daily trading volumes averaged US$5bn in H1, a 72% rise y-o-y
- Chinese gold-backed ETF holdings have increased by 21% so far this year
- Gold withdrawals from the Shanghai Gold Exchange (SGE) saw a marginal rebound in June as China’s gold demand as a whole slowly recovers. Despite m-o-m upticks, the volume of gold leaving the SGE’s vaults in the first half was still significantly lower than H1 2019, due to supressed gold demand amid a higher gold price and consumers’ lower budgets for discretionary items
- Chinese local gold price discount2 narrowed further in the month, as gold demand continued to rebound following the significant deceleration it experienced earlier in the year and supply-chain disruptions in Western markets eased
- The People’s Bank of China (PBoC) kept its gold reserves unchanged at 1,948t in June, accounting for 3.42% of its total reserves.
Gold prices edged higher in June. Primarily, the low interest rate environment globally and concerns about a possible recurrence of COVID-19 in major economies lifted international gold prices during the month. While there was a 2.6% rise in the LBMA Gold Price AM in USD, the SHAUPM climbed by 1.5% and reached a new high as the RMB strengthened.
The RMB gold price recorded a 16% rise during the first half of 2020, outperforming all other major Chinese assets. Moreover, the SHAUPM in RMB set a new record on 18 May by reaching 399yuan/gram. Rising risk and uncertainty amid the COVID-19 outbreak, reduced opportunity cost to hold gold amidst an ultra-low interest rate environment and the bullish gold price momentum have attracted strong investment flows to gold products such as gold ETFs and exchange-listed gold products, pushing up gold prices in different currencies so far in 2020 as a result.