With China’s stock market meltdown now into its fourth week, what does this mean for gold demand out of the world’s second largest consumer of the precious metal?
“Given that one of the reasons for gold’s tepid demand in China is due to the strong equity bull market, questions are now raised if the current bearish ‘A’ share market could spark Chinese interest in gold once more,” Howie Lee, investment analyst at Philip Futures, wrote in a note on Wednesday.
Chinese equities plunged to a four-month low on Wednesday, as panic selling gripped markets despite fresh measures by the government to shore up confidence, including easing rules for insurers to invest in blue-chips stocks, raising margin requirements for short positions against small-cap stocks and warning against “irrational selling.”
Investors so far have taken little comfort from these steps, with the benchmark Shanghai Composite down over 32 percent since hitting a seven-year peak of 5,166.35 on June 12.
