The global coronavirus crisis has sent shockwaves throughout the financial markets. China, the first region dealing with the virus, is still struggling to increase domestic gold demand.
China’s Gold Demand Remains low
It was somewhat to be expected that the financial markets would not return to normal anytime soon. The global markets are still reeling due to the novel coronavirus. As the pandemic becomes more severe and lethal, that unease will only intensify.
Even in China, where the pandemic appears to be under control, there are still problematic situations. Especially as far as gold demand is concerned, the current situation looks rather bleak.There is still very low demand for gold bullion right now, with little improvement in sight.
The reason for this uneasy situation is not difficult to determine. When the coronavirus broke out, all malls had to close down until further notice. Since a lot of gold buying occurs in these malls, the revenue has decreased significantly. For a country widely considered to be the world’s biggest gold consumer, that is far from an ideal situation.
In 2019, Chinese consumers represented 20% of the total gold demand, according to WGC. That is a very impressive statistic, but one that will not necessarily be repeated in 2020. In the first months of 2020, demand for gold, silver, and jewelry decreased by 41% compared to the same period in 2019.
A Lengthy Recovery Process
Not everything is doom and gloom in China, however. The China Gold Association remains hopeful that things will improve in the near future. The process will be slow-going, for obvious reasons, but the gold demand will pick up eventually. Especially at the current price, things may move slightly quicker than experts can anticipate.
In terms of consumer demand, however, things look very differently. Coronavirus fears will dissuade a lot of Chinese from buying gold and jewelry for some time to come. Until the entire pandemic has been overcome globally, that situation will remain relatively bleak.
As far as Chinese investors are concerned, there appears to be some mixed sentiment. Purchasing gold with deposits is not necessarily being done in large quantities right now. That being said, it won’t take much volume to turn the ship around. As the current premium rates are “negative”, there is no reason for investors not to buy gold sooner or later.
The situation in China paints an interesting picture for the rest of the world. Until the major buyer of gold steps up its game, the rest of the world will not follow suit either. While the momentum isn’t overly positive right now, the gold price seems to be performing rather well. It has managed to stay above $1,550 per ounce since its most recent bounce.