Are Chinese Gold Purchases Keeping Market Afloat?

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Feb. 26 (Bloomberg) -- Bloomberg's Scarlet Fu and Bloomberg Industries’ Kenneth Hoffman put futures in focus with a look at gold in "On The Markets" on Bloomberg Television's "In The Loop."


It is retreating from a 17-week high this morning.

For more on the precious metal, i am joined by ken hoffman, joining us from princeton.

Gold is recovering a bit from last year's 20% tumble.

Why's that?

Hi, scarlet.

The reason gold is had a good year this year is -- we have talked about this a few times in the past -- chinese buying.

We got some numbers out late last night from china.

They bought something like 80,000 kilos of gold in january.

That is more than last year's january and february combined.

At the same time, the big selling we saw in etfs, it has subsided, basically stopped.

The buying from china with the lack of etf selling has come together to give us higher gold prices.

Let's focus on the chinese buying could we have a seasonal affective perhaps buying ahead of chinese new year.

But is there something more to it than that?

We're hearing anecdotally that a lot of people inside of china are afraid of inflation.

We have heard a lot of things about the prices of pork and oranges really starting to move higher there.

They're having a bit of a banking crisis.

When you have these types of things for people are -- where people are perceiving more inflation, they go out and buy in gold.

You see a lot of gold in china and that is why it has been a trend that probably continues in the short to medium term.

You mentioned that etf selling seems to have stopped.

At what point does it pick up?

I don't see a lot of the man out of the west.

The west has sort of lost their favor with gold.

Perhaps they need the price moving higher.

There's a lot about the taper.

All of these things combined has kept etf buying on the sidelines.

At least the selling a stop.

-- the selling has stopped.

What is it mean for gold prices?

Both oceanus this kind of hedge, whether you call it against the currencies or inflation could what is the bitcoin the demise mean for gold?

With bitcoin, someone drops coffee copy on the server and it is all gone.

That cannot happen with gold.

The buyer of gold is looking for an inflation hedge or a fear of the economy.

Bitcoin has really been an easy transfer of money around the world.

I talked to senior executives at the currency trading firms and i asked them if you would start trading bitcoin and they said, look, no self-respecting operation would ever use bitcoin as trade, because it is too volatile.

I can't say we have a currency move of 50% every single month.

That is kept it going to the site.

Gold is continuing what are traditionally does -- indian mothers buying it for their dowry, chinese consumers worried about inflation.

That is the movement of gold.

It is a completely different customer base.

That's a good point.

Lots of perspective there.

At the end of last year we had forecasts of gold falling and yet it has a surprise moving higher in 2014. what indications do you see that traders and investors are changing the long-term view?

I don't think you have seen that yet could a couple of the firms of come out with a little bit higher gold prices.

But we track heavily used metals and mining and there is still a lot of people who are not convinced that this will move higher.

From their perspective, gold has been in the $1200-$1400 range for quite some time and they want to see a break.

Thanks so much for that perspective.

Ken hoffman of bloomberg

This text has been automatically generated. It may not be 100% accurate.


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