Gold price: Asian bargain hunters are back

While bargain hunters have stayed away from global equity markets which have also become much more affordable during the summer doldrums, gold traders in China and India made the most of the availability of cheap metal.

Gold fell to a five-and-a-half year low below $1,100 in July and averaged $1,117 during August, a price reflected in the import data.

Net gold imports from Hong Kong rose to 59.3 tonnes in August the third increase in a row, according to Hong Kong Census and Statistics Department. Imports from Switzerland also rebounded bringing total imports for the month to close to 80 tonnes.

Hong Kong traditionally accounted for the bulk of imports into the country, but Shanghai and Beijing are becoming important centres for the gold trade so you could add substantial tonnage to those totals.

Long the top importer of gold, India fell behind China in 2013, but August data from the sub-continent shows even more robust demand than its neighbour to the north.

Despite measures by the Indian government to curb gold imports, official trade data shows bullion imports more than doubled to $4.95 billion or 140 tonnes in August compared to 89 tonnes in July.

India’s August tally is up from just over $2 billion (50 tonnes) in the same month last year and is roughly the equivalent of the last 6 months’ net redemptions of physically-backed gold exchange traded funds.

On Tuesday gold’s post-Fed rally was fading with futures in New York exchanging hands for $1,127 an ounce putting gold back in the bargain bin category, but the picture is being complicated by the plunge in platinum, which hit a seven-year low on Tuesday.

A research note yesterday from investment bank Barclays argues that the declining platinum price could drive physical demand of platinum in jewellery:

“Currently, platinum/gold is trading the lowest level in more than 25 years. Although the diesel-engine scandal has a limited direct effect on gold, the price ratio between platinum and gold can affect jewelry demand, shifting some from gold into platinum, especially in markets such as China, where there is a preference for platinum jewelry,” the analysts wrote.

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