Shanghai Gold Exchange Contract Volume Surges on Price Slump

Gold volumes for the benchmark cash contract on the Shanghai Gold Exchange, China’s biggest spot bullion market, climbed to a 10-week high as a price slump spurred buying.

The volume for bullion of 99.99 percent purity climbed to 19,775 kilograms yesterday, the biggest since Oct. 8, from 13,673 kilograms the previous day, according to exchange data compiled by Bloomberg. That compared with a record 43,272 kilograms reached on April 22. Prices fell today for a third day, losing as much as 2.1 percent to 235.85 yuan a gram ($1,208 an ounce), the lowest since February 2010.

The surge underscores robust demand in the nation set to overtake India as the largest user. When gold entered a bear market in April, demand for jewelry and bars surged in Asia, even as other investors cut holdings in exchange-traded products at a record pace. Bullion in London rebounded after yesterday tumbling below $1,200 an ounce for the first time since June on Federal Reserve’s plans to start trimming stimulus.

“Quite a number of investors in China have been waiting in the wings for a bargain-hunting opportunity,” said Liu Xu, senior analyst at Capital Futures Co. in Beijing. “Volumes also jumped as some investors, who had bought before the Fed meeting betting on an inutile-gesture from the Fed, had to close out their positions now.”

Chinese demand for the precious metal may reach 1,000 metric tons this year, the World Gold Council estimates. China’s shipments from Hong Kong unexpectedly rose to the second-highest on record in October, with the amount in the first 10 months more than doubling to 955.9 tons.

“Price-sensitive buyers came in heavily last time gold fell to $1,200,” James Steel, an analyst at HSBC Securities (USA) Inc., wrote in a note yesterday. “A repeat could stem declines.”

The precious metal for immediate delivery in London rose 0.7 percent to $1,196.45 an ounce by 12:52 p.m. Singapore time. The price is down 29 percent this year, heading for the first annual drop since 2000 as the global economy improved. Assets in bullion-backed ETPs fell 32 percent in 2013 after gaining every year since the first product started in 2003.

— With assistance by Glenys Sim, and Feiwen Rong

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