Commentators calling the decline of the Chinese economy clearly haven’t told the country’s gold market investors. China’s economy is growing at its slowest rate in three years – 7.5% in the second quarter – but Shanghai premiums on gold bullion stood at more than $30 an ounce above the international benchmark set by London pricing, at the time of writing in mid-July.
Why? Partly, this is because household consumption is a very low part of GDP in China, so it’s not so odd for demand to be increasing at a household level while overall GDP growth declines. But it’s also because physical demand for gold in China is robust both at the individual level and through central-bank buying. According to gold market observer Goldseek, gold exports from Hong Kong to China were up 68% year on year by early July.
China has its own gold market, the Shanghai Gold Exchange. And although this market is not yet a driver of the global gold price, it is becoming steadily more important in the world gold market.
