WGC: Weak Gold Demand Resulted in Shanghai-London Gold Price Discount

SEATTLE (Scrap Monster): The World Gold Council cited significantly weak gold demand as the main driver behind the widest Shanghai-London spot gold price discount in China.

The gold demand in the Asian country has dipped to the lowest level in almost a decade in 2020, falling by nearly 27% from the prior year. The local Chinese gold price spread averaged at $24 per ounce during the year, which is substantially lower when matched with the ten-year average spread. The country’s gold price spread was rarely negative between 2019 and 2020.

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According to WGC, the local gold price premiums witnessed during most days of the year was mainly due to supply shortage, high costs associated with gold imports, in addition to restrictions in place in China on gold imports. The unseen dip in gold demand, relatively healthy supply of gold and restrictions on exports might have contributed to the record-level Chinese gold price discount during the previous year.

The Council foresees room for improvement in China’s gold consumption in 2021. A recovery in consumer disposable income, mainly due to supportive fiscal and monetary policies, will potentially lead to higher gold consumption in 2021 than in 2020, WGC noted.