A Golden Week for gold, or just for Chinese workers?
- Last Golden Week saw China’s gold imports hit 10 month high (Hong Kong Census and Statistics Dept)
- Yuan-denominated gold fix could lead to long-term price rally
- 2016 could be the year for gold market bulls (easyMarkets)
From 9-13 February, the Spring Festival Golden Week will see hundreds of millions of Chinese citizens down tools and enjoy a week’s well-earned holiday, following Chinese New Year on 8 February. To welcome in the year of the monkey, families will enjoy firework displays, feasting and the exchange of gifts.
The economic impact of giving around 770 million people a week off work is staggering. The surge in travel and tourism bookings made by Chinese citizens is rivalled only by that which occurs during the country’s National Day Golden Week, which takes place from 2-7 October. There’s also a sharp rise in the purchase of food, decorations, clothing and gifts.
Gold is one item that benefitted from 2015’s October Golden Week, with net imports from Hong Kong (the main conduit) reaching a ten month high during September, at 97.242 tonnes according to the Hong Kong Census and Statistics Department.
China’s relationship with gold and its impact on the price of gold is a complex one. Nikolas Xenofontos, Director of Risk Management at leading online trading services provider easyMarkets, explains,
“China’s Shanghai Gold Exchange (SGE) is the world’s fourth largest for global gold transactions, trading around 75 tonnes per day but the country’s pricing power has struggled to compete with the older institutions of London and New York. The SGE is aiming to change that through the yuan-denominated gold index, which could mark 2016 out as the year for gold market bulls.”
The volatility of Chinese markets has also impacted on the price and popularity of gold over the past year and is likely to continue to do so during 2016. Safe-haven buying demand is a powerful influencer and many analysts are excited about gold’s prospects for the next 12 months.
Of course, demand for gold is about far more than just China. The fall of the other BRIC economies, the global commodities rout and (most recently) the Federal Reserve’s actual and planned incremental interest rate increases have all played their part in gold’s decline from its heady all time high of $1,920 per ounce in September 2011.
Despite so many negative factors, 2016 could mark a turning point for gold. While it remains to be seen whether the current rally is just a short term one, or the start of a longer term trend, it is a rally nonetheless, and investors and analysts are watching gold carefully as Golden Week approaches. 2016 could just be the year that gold begins to shine once more.
For further details visit www.easymarkets.com, email pr@easymarkets.com or call +44 203 1500 748.
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