Chinese investors short gold in London as prices tumble while the retail public buys; Tianjin Precious Metal Exchange flooded with requests from investors looking to short gold
April 20, 2013 Leave a comment
Chinese investors short gold in London as prices tumble
Staff Reporter, 2013-04-20
Members of the public have rushed to buy gold amid the current price drop, while investors have been actively short selling. (Photo/CFP)
Chinese investors in London are increasingly short selling gold shares as the price of the precious metal has lost about 30% of its value from a year and a half ago.
The price of gold in the city hit a low of US$1,385.70 an ounce at one point on April 15, a plunge of nearly 30% from a historic high of US$1,920.38 an ounce in September 2011, according to the Chinese-language National Business Daily, which quoted an official at the research unit of Donghai Futures.
An investment consultant at Mintai Precious Metals, a member of the Tianjin Precious Metal Exchange — one of two precious metal exchanges in China approved by the State Council — said his company was flooded with requests from investors looking to short gold.Some investors had reaped profits ranging between 10% and 70% of their initial value, the consultant told the newspaper. The panic in the gold market has become prevalent, yet analysts are divided on whether gold prices will slide deeper into bear territory.
“Isn’t the nearly 30% tumble in prices the clearest indication that gold has entered a bear market,” a research official at Donghai Futures said. Some analysts at GF Futures agree that gold had entered the bear market, and had done so earlier than expected.
But a different analyst at GF Futures said that it was still too early to conclude that gold had entered a bear market. “If gold prices fall below US$1,300 an ounce two weeks from now and continues downwards to US$1,000, then we can say that gold is officially in bear territory,” the analyst said.
Offering an explanation for the drop in gold prices, the analyst said “central banks in Europe, led by Cyprus, have been selling their gold reserves since the end of last year.” The increase in the supply of gold in the market had pushed prices down as a result, and the prices may hit a low of US$1,300 an ounce later this year.
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