Insights

Summary

• Indian gold imports were 62.3t in October 2019 – 11% lower than the same month last year
• The domestic gold price declined by 2% in November, ending the month 20% higher than the end of 2018
• With the onset of the wedding season in November, the local market was back in premia of US$1/oz on 6th November after trading at discount for more than five months, but lower than expected wedding volumes pushed the market back into discount by end of November
• Late withdrawal of the monsoon, with heavy rainfall in several states of India, damaged kharif crops, leading to more than 50% of kharif crops trading below the minimum support price (MSP) due to high moisture content and little progress in procurement of crops from government . This will impact rural income in Q4 2019

Summary

• The Shanghai Gold Benchmark price (PM) extended its decline in November. The appreciating USDCNY has again made CNY-denominated gold prices weaker than the dollar gold price, resulting in another drop in local gold premium last month.
• Driven by elevated price volatility, Au(T+D)’s trading volume was higher m-o-m. Meanwhile, the industry’s stocking ahead of the Chinese New Year’s Festival led to a higher Au9999 trading volume and gold withdrawals from the Shanghai Gold Exchange (SGE) in November. • During the first ten months of 2019, China’s gold imports dropped by 41% y-o-y.
• While some investors have stepped away, Chinese gold ETFs’ gold holdings stabilised around the highest level since last October.
• The People’s Bank of China (PBoC) left its gold reserve unchanged at 1,948t in November.

The discovery of the process to harden pure gold has formed the foundation for all innovative pure gold products and become an important feature favoured by consumers and jewellers... The hard-pure gold jewellery market is booming but lacks an industry standard defining these products and providing industry guidance.

The World Gold Council China team has been working with the National Jewellery Standardisation Committee, industry associations and leading Chinese jewellers, to draft proper standards for hard-pure gold jewelleries.

As 2019 comes to an end and 2020 begins, we believe that:

• Financial and geopolitical uncertainty combined with low interest rates will likely continue supporting gold investment demand
• Net gold purchases by central banks will likely remain robust even if they are lower than the record highs seen in recent quarters
• Momentum and speculative positioning may keep gold price volatility high
• Gold price volatility and expectations of weaker economic growth may result in softer consumer demand near term
• But structural economic reforms in India and China will support demand in the long term.

Note: our comprehensive annual Outlook will be published by mid-January 2020.

Summary

• Indian gold imports were 38.3t in October 2019 – 15% lower than the same month last year
• The domestic gold price rose by 3.1% during October, ending the month 22.4% higher than the end of 2018
• With the festival of Dhanteras in October and onset of wedding season in November, the discount in the local market narrowed to US$3/oz by end of October from a discount of US$29.5/oz at end of September
• Late withdrawal of the monsoon, with heavy rainfall in several states of India, damaged the kharif crops and more than 60% of kharif crops traded below the minimum support price (MSP) in October due to high moisture content and little progress in procurement of crops from government.

The gold price has risen more than 15% this year against a backdrop of falling interest rates, economic uncertainty and geopolitical tensions. Dr Lu Zhengwei, Chief Economist of China Industrial Bank, Chief Economist of Huafu Securities and Vice Chairman of China Industrial Bank Research Limited, looks back in time to forecast the future for gold.

Our latest central bank data is now available on Goldhub and makes for interesting reading. Looking at the latest statistics on gold, monthly increases (of a tonne or greater) in gold reserves have begun to ease over the past three months. In October, reported net purchases totalled a healthy 41.8t, but this was 16% lower than September (49.6t), which itself was 16% lower than August (59t).

• The Shanghai Gold Benchmark price fell slightly in October as the appreciating USDCNY offset the rise in US dollar-denominated gold price. This pushed the local gold price to a discount, the first in 12 months
• Impacted by the weak performances of CNY-denominated gold prices, speculative demand dropped further. Trading volume of Au9999 continued its decline during the month on weaker physical gold demand
• During the first ten months of 2019, China’s gold imports dropped by 41% y-o-y
• Three new gold-backed ETFs were approved in October, raising the total number of gold-backed ETF products in China to seven
• The People’s Bank of China (PBoC) didn’t purchase any gold in October, leaving its gold reserves at 1,948t.

I have just come back from a short trip to India, presenting at the Gems and Jewellery Export Promotion Council’s third India Gold and Jewellery Summit in Delhi, as well as sneaking in some field research and presenting the investment case for gold to some wealth managers in Mumbai with my colleague, Mukesh.

The Beijing International Jewellery Fair kicked off on 14th November, attracting thousands of exhibitors from over 20 different countries and regions. On the coldest day so far this year in Beijing, exhibitors shared the hottest trends in the gold jewellery industry.

The UAE is an important jewellery market in the Middle East: its ten-year average jewellery demand in 2018 at 54.7t, only was second to Saudi Arabia. However, conditions in the UAE have been tough for gold in recent years.

Today we’ve published our Retail gold insights 2019 report, a thematic analysis of our new consumer research survey. With a base of 18,000 participants across India, China, Russia, Germany, the US and Canada, we believe it is the largest ever consumer survey on the global gold market.

Watch today’s Gold Demand Trends webinar where we discussed the key shifts in gold demand during Q3 2019 as the price reached a six-year high.

Last month, we launched the Responsible Gold Mining Principles (RGMPs), a new framework that sets out clear expectations for consumers, investors and the downstream gold supply chain as to what constitutes responsible gold mining. In this video, Gary Goldberg, at the time CEO of NewmontGoldcorp, Mick Wilkes, CEO of OceanaGold and I discuss why we developed the RGMPs, investor expectations around ESG and expectations as to how the mining industry will evolve over the next 5 to 10 years.

It’s old news that the world economy is suffering. Ongoing trade tensions between the US China (and elsewhere too), the draining Brexit saga, as well as a myriad of other geopolitical uncertainties, have taken their toll. Global growth is slowing, and investors are downbeat on world economic prospects. Recession in many major economies is now a real possibility... As a result, central banks around the world have been busy cutting rates.

• Indian gold imports reached just 26.3t in September 2019 – 61% lower than the same month last year.
• The domestic gold price was 2.4% lower in September compared to August, but 18.7% higher y-t-d.
• With weak physical demand, the discount in the local gold market reached a peak of US$55/oz in September, but narrowed to US$29.5/oz by the end of the month.
• Monsoon levels in 2019 are the highest for 25 years; Kharif sowing almost flat y-o-y.