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Chinese Gold Imports Surge Sixfold

Release Date: 
Tuesday, May 8, 2012

Gold and silver prices fell as the growing eurozone crisis weakened the euro and bolstered the dollar. Gold prices were down $27.10, trading at $1,612.40 per ounce at 6:41 a.m. Pacific Time. Silver fell $0.65, trading at $29.54 per ounce. (Click here for the most current spot prices.) Jürg Kiener, MD & CIO, Swiss Asia Capital, Singapore commented on the current gold prices saying that at current valuations, "it's a fantastic buying opportunity."

The stock markets also tumbled today, with the S&P dropping to a two-month low, as investors reacted to concerns that Greece's political crisis may lead to a bond default and ejection from the EU. The Dow and NASDAQ Composite also fell, losing more than 1.3% and 1.6% respectively as of 8:00 a.m. PDT.

Mainland China's gold imports from Hong Kong increased more than sixfold in the first quarter from one year ago and were 59% higher in March versus February. The March figures represent the third-highest import levels on record and were approximately half of the total volume of gold shipped from mainland China to Hong Kong in 2011. China may become the biggest consumer of gold this year, surpassing India, according to a forecast from the World Gold Council.

"Rising prosperity levels among the population coupled with tighter laws governing property speculation are likely to contribute to sustained high demand for gold in China," Commerzbank analysts said in a note. "Above all, Chinese gold demand should lend key support to the price of gold during the course of the year," they said.

"We're looking at another solid year for Chinese demand based on these early numbers," said Nick Trevethan, senior commodities strategist at Australia & New Zealand Banking Group Ltd. "While it's largely related to price, negative real interest rates should keep demand strong."

Gold prices may reach $1,800 per ounce in the third quarter and $2,100 per ounce in the fourth quarter of 2012, said Deutsche Bank in a report. Central banks are a powerful source of gold demand in the market, with significantly more purchasing than in previous years, the bank noted, adding, "we are therefore maintaining our bullish view to the yellow metal."

(Source: "China's Gold Imports Jump as Country May Become Biggest User," Bloomberg, May 8, 2012; "PRECIOUS-Gold dented by euro fall after European elections," Reuters, May 8, 2012; "Gold to touch $2100/oz in Q4 2012: Deutsche Bank," Commodity Online, May 8, 2012)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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