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

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.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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