The research note published by Standard Bank states that the Chinese physical gold demand continues to remain weak, despite sharp fall in gold prices. The gold premium at the Shanghai Gold Exchange (SGE) is seen hovering around $5 to $6 for quite some time. The lack of movement in Shanghai premium has diminished China’s charm as an importer of the yellow metal.
The SGE gold premiums have failed to move in tandem with the gold prices. While gold prices recorded a sharp fall from $1,300 per Oz down to $1,200 per Oz levels, the premiums remained range bound between zero and $5 per Oz. This clearly signifies weak demand response to lower gold prices.
The physical gold demand has weakened since April this year. Gold buying in the country decelerated during the second quarter of the current fiscal in comparison with the previous year, Standard Bank notes. The physical demand since August this year is almost 50% lower when compared with the demand during the same period in 2013.
According to Standard Bank, gold prices may move higher in the near term. But rallies would turn out to be short-lived. The festive season demand in India may provide some support to gold prices. However, Asian physical demand doesn’t look strong enough to act as a major catalyst to drive the gold prices higher.