Gold no slam-dunk sell in China as aunties pounce

Price Forecasts

Bullion is 34% below the record set in 2011 and on course for its first annual loss since 2000 after falling 24% to $1,276.64 an ounce in London this year. The Standard & Poor’s GSCI gauge of 24 commodities fell 5% since the end of December, and the Bloomberg U.S. Treasury Bond Index lost 2.1%. While the MSCI All-Country World Index of equities surged 18% over the same period, the Shanghai Composite Index slumped 3.4%.

Bullion will average $1,175 in the third quarter of next year, according to the median of estimates from the 10 most- accurate precious metals analysts tracked by Bloomberg in a survey published last month. Prices were last at that level in 2010. Goldman expects prices at $1,050 by the end of 2014.

China’s rural per capita cash income in the first nine months jumped by 12.5% from a year earlier, while urban per capita disposable income rose 9.5%, data from the National Bureau of Statistics shows. The economy will grow 7.6% this year and 7.4% in 2014, according to the median of estimates compiled by Bloomberg.

The nation ranks fourth worldwide for people with $1 million or more in investable assets, after the number of high- net-worth individuals in the country rose 14% to 643,000 last year, according to a report by Cap Gemini SA and Royal Bank of Canada. The U.S. ranks first, followed by Japan and Germany.

Bearish Signs

Policy makers clamped down on property investments in March to cool the housing market, ordering the central bank to raise down-payment requirements for second mortgages in cities with excessive cost gains. New home prices in China’s four major cities in October jumped the most since January 2011, the National Bureau of Statistics said yesterday.

Societe Generale SA, which correctly predicted gold’s slump this year, sees prices averaging $1,125 next year, the lowest since 2009, because an eventual slowing of U.S. stimulus as the economy strengthens will cut demand. Credit Suisse Group AG forecasts an average of $1,180 for next year and $1,200 for 2015. Bank of America Corp. is more bullish, predicting $1,294 in 2014 and $1,356 the year after. Barclays Plc predicts China’s demand growth will slow to 5% next year from 15% this year.

Fed Easing

“The Federal Reserve will eventually reduce quantitative easing and that will drive up bond yields there,” said Wang Weimin, a gold analyst at Dalian Fortune Futures Co. in Dalian, northeast China. “Funding costs have been rising inside China, all bearish for investment in gold.”

The premium to take immediate delivery of gold in China has declined to $1.30 an ounce from an average of $19.70 this year and a record $109.29 in April, according to data from the Shanghai Gold Exchange. Any annual decline in Chinese consumption would be the first since 2002, when the government lifted a ban on bullion trading and opened the Shanghai bullion bourse.

While China overtook South Africa to be the world’s largest gold producer in 2007, domestic output failed to keep up with the nation’s consumption, said Shanghai Leading Investment Management’s Duan. Production of 403 tons in 2012 compares with domestic demand of 776 tons, according to the China Gold Association.

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