Q2 Gold Demand Suffers
Today’s Spotlight Market
Gold futures have chopped around over the past several sessions, driven by trader indecision.? The disappointment of China?s much lower stocks of the yellow metal have acted as black cloud hanging over the market.? However, Chinese equities have been pummeled in recent sessions and there is some concern mounting on that front.? This could drive a bit of defensive buying in the metal.
Fundamentals
China has really been a mixed bag for metal traders. The country is still underperforming economically and no matter what stimulus the People?s Bank of China (PBoC) uses, the economy has not responded to it.? Further declines in Chinese equities could force traders to higher ground, which could trigger precious metal buying.? With Gold falling below the $1,100 an ounce level, it may be attractive to value buyers of the metals.?
GFMS reported global Gold demand in Q2 was the lowest it has been since 2009.? World demand for the Gold bars and coins had declined by 12% year over year from April-June, and 63% below the peak demand in 2013.? Jewelry demand had declined by 9%, while global production had declined by 6%.? Total physical demand for Gold fell by 14.2% from the same period a year ago and was estimated to have been 858 tonnes.? Central bank purchases and China demand both had large declines, falling 62% and 23%, respectively.?
The data certainly suggests that Gold has fallen out of favor with investors, especially in China, with traders flocking to equities instead.? If this sell-off in Chinese stocks continues, could some of these investors return to Gold? Time will tell if this is the case.
Technical Notes – View Today’s Chart
Turning to the chart, we see the August Gold contract consolidating after the steep decline to start off last week.? Daily ranges have had decent size, but the daily price changes have not been very large.? This is indicative of indecisive trading.? The RSI indicator is giving oversold readings, which could be seen as supportive in the near-term.
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