(03 NOVEMBER 2017)DAILY MARKET BRIEF 3:Chine Gold consumption increases while output declines

Price of gold remains above $1270. Since the start of the year, we recall that gold has gained almost 6% underlining global uncertainties. It is important to assess gold’s potential by looking at China as a significant part of the market takes place in China. The Chinese consumption has increased in the first 3 quarters of this year of 15.49% y/y. This increase has happened against the backdrop of the stock market recovery. Indeed Chinese stocks took a big hit in 2015.

In China, the gold output has strongly declined, facing a 3.76% decline since the start of the year. On top of that Chinese regulations are also stricter, in particular regarding the waste from gold mining. Chinese authorities have considered that the environmental impact of producing gold has overcome the proceeds from the sale.

In our view, we also believe that levels of production cannot be sustainable over the long haul. The reserves are falling and then the production should keep on declining. We consider that it is likely that the gold price should head higher within the next few month to reflect those data.

By Yann Quelenn