浙江之源资产评估有限责任公司
2017 China Gold Price Trends and Market Supply-Demand Forecast
Release time:
2017-01-16
Source:
Overseas Mining Investment Network, 2017-01-06
Concerns about inflation and demand for safe-haven assets will push gold prices higher. The two key factors influencing gold prices are safe-haven demand and declining real interest rates. In 2016, the timing of gold price increases closely coincided with periods of heightened risk aversion—specifically, market concerns about Japan in January, the UK’s “Brexit” vote in June, the U.S. presidential election in November, and the Federal Reserve’s rate hike in December—all of which reflected gold’s growing appeal as a preferred asset amid an increasingly risky market environment. According to MF’s forecast, global real GDP growth is expected to rise from 3.08% in 2016-2017 to 3.44%. Meanwhile, the consumer price index (CPI), an indicator of inflation, is projected to rebound from 2.90% to 3.28%. Judging from current interest-rate dynamics, we believe that market expectations for consecutive Federal Reserve rate hikes are already well priced in. As a result, there is limited room for market interest rates to continue rising in the first half of 2017. However, as inflation levels rise, the overall real interest rate environment will likely maintain its ongoing downward trend. In the second half of the year, concerns will shift toward the recovery of the real economy. Should global economic growth slow down in the second half, it could trigger a decline in financial markets’ risk appetite, making gold the optimal asset for portfolio allocation.
Investment interest in gold will also continue to grow in the future.
Source: Publicly available information
U.S. 10-year Treasury Inflation-Protected Securities (TIPS) are expected to continue declining in response to ongoing downward pressure from inflation factors.
Source: Publicly available information
Gold prices are forecast to continue rising over the next five years.
Source: Publicly available information
Relevant report: The report released by Zhiyan Consulting— 2017-2022 China Gold Market Supply and Demand Forecast and Investment Strategy Research Report 》
In 2017, the overall growth rate of gold supply slowed down. According to forecasts, gold supply in the third quarter of 2016 reached 1,153 tons, representing a year-on-year increase of 1.3%. However, due to a substantial reduction in exploration spending, exploration activities came to a standstill, and for the first time in history, mineral gold production declined. As a result, gold supply later on faces a significant risk of shortage. In terms of mineral gold, total output in the third quarter was 822 tons, down 2.1% year-on-year. This decline was largely driven by a 14-ton reduction in Indonesia's output. Lower ore grades at mining sites and reduced exploration expenditures will further depress mineral gold production in 2017. As for scrap gold, output in the third quarter of 2016 reached 336 tons, up sharply by 20.3% year-on-year. The continued upward trend in gold prices next year will likely boost the supply of scrap gold.
Global jewelry consumption has declined sharply (in tons).
Source: Publicly available information
China's investment demand has significantly increased compared to last year.
Source: Publicly available information
Physical demand is declining, but investment demand is set to continue rising. According to forecasts, global physical gold demand will further decline in the fourth quarter of 2016 and in 2017, though the pace of decline will slow down, with year-on-year declines remaining around 30%. In the third quarter of 2016, total demand reached 767 tons, a year-on-year decrease of 30.1%. Seasonal factors have not significantly boosted demand, but investment demand—particularly in China—could step in to replace jewelry consumption and become a new driving force behind gold demand.
Looking at individual segments, global jewelry consumption in the third quarter totaled 375 tons, down 28.2% year-on-year. Among them, India saw a decline of 41%, and China a decline of 27%. However, in the fourth quarter, driven by holiday factors, jewelry sales in India exceeded expectations, retail inventories declined, and November imports rose 10% year-on-year, reaching the highest level so far this year. It is expected that jewelry consumption data for the fourth quarter and the first quarter of 2017 will show improvement. In the third quarter of 2016, retail gold investment reached 211 tons, down 29.4% year-on-year. Europe experienced a substantial year-on-year decline of 36%, while India saw a drop of 60%. By contrast, China, benefiting from the depreciation of its currency, significantly increased its gold holdings as a means of preserving value, up 11% year-on-year. The gold premium reached its highest level in three years, and imports surged year-on-year. It is anticipated that investment demand in 2017 will be stronger than previously expected.
|
Category
|
Q3.15
|
Q4.15
|
Q1.16
|
Q2.16
|
Q3.16
|
|
|
Supply
|
Mineral
|
839.2
|
810.4
|
743.4
|
774.9
|
822
|
|
Waste material
|
279.4
|
290.5
|
339.9
|
303.5
|
336.2
|
|
|
Net hedging
|
20.1
|
18.8
|
54.8
|
20.8
|
-5
|
|
|
Supply
|
1138.7
|
1119.7
|
1138.1
|
1099.2
|
1153.2
|
|
|
Demand
|
Jewelry
|
558.1
|
562
|
400.9
|
Links: Address: Room 909, 9th Floor, Science & Technology Building, Eastern Software Park, No. 90 Wensan Road, Hangzhou City, Zhejiang Province Telephone:0571-85115488 
Scan with your phone
| |