China’s Discount on Gold Hits $100 per Ounce as Consumer Demand Weakens Further

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The demand for gold has been dwindling in China since the COVID-19 pandemic began. Today, this situation has not improved in the slightest. One positive outcome is how this allows traders and brokers to scoop up gold at a price well below the global market value.

The China Discount Deepens

It is always interesting to see how different parts of the world respond to gold. China has been hit fairly hard in this regard. Demand for the precious metal keeps dwindling and shows no signs of picking up. This forces local brokers to sell their gold stock at a discount. Taking advantage of this widening price gap can be very beneficial for international players. 

More specifically, the current gold price in China is lower than the global average. Achieving a discount of up to $100 per ounce is not abnormal. Just last week, the average discount was closer to $70 per ounce. Liquidating at a discount has been going on in the country since February of 2020. 

Consumer demand for bullion remains well below expectations. During tough financial times like these, there are plenty of other concerns to address first. Ensuring one can survive becomes the top priority. Investing in gold has clearly taken a backseat. It is likely this situation will remain in this state until a coronavirus vaccine is found.

One positive note is how jewelry manufacturers showed a slight increase in demand. This has to do with an upcoming national festival in late August. Other than that, there is very little to get excited about. Dwindling investment demand remains a pressing problem.

India’s Premium is Lowering

A very different situation exists in India and Singapore. Both countries still maintain a premium for buying physical gold. That rate has undergone some changes. In India, premiums have decreased by as much as 50% per ounce. In Singapore, they remain near the $1 mark per ounce, which is virtually neglectable,

The bigger question is how the market will evolve over the coming months. With no financial certainty to speak of, the safe haven assets will often benefit as a result. As the US Dollar weakens even further, the demand for alternatives will remain as strong as it was. 

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