High gold price slows demand for gold in China – Commerzbank

The price of gold is again approaching the record high of $2,758 per troy ounce, notes Commerzbank commodity analyst Carsten Fritsch.

Almost all-time high again

“There is further evidence that the high price level has a visible dampening effect on gold demand in China. According to data from the China Gold Association, demand for Chinese gold in the first three quarters fell 11% year-on-year to 742 tonnes. Demand for jewelery suffered in particular, falling 27.5% to 400 tonnes. In contrast, demand for bars and coins increased by 27% to 283 tonnes.”

“This reflects demand for gold as a safe haven and store of value. However, this was not nearly enough to offset weak price and cycle-sensitive jewelry demand. Using the available data, Bloomberg calculated that demand in the third quarter fell by 22 %.”

“Here, too, the drop in jewelery demand was disproportionately high at 29%. In addition, demand for bars and coins was also 9% lower than the previous year. Thus, traditional demand for gold is currently creating headwinds rather than headwinds, which is likely to limit further upside potential for the gold price.”