The LBMA Gold Price PM jumped 6% in February, ending the month at $1,910/oz. It’s the strongest m-o-m performance since May 2021 as per a Gold Market Commentary from the World Gold Council. According to the statement, following strong retail gold consumption during the Chinese New Year Holiday in early February, a decline in Au9999 trading volumes indicated that wholesale physical gold demand weakened during March. This is likely due to manufacturers' replenishing their stocks before CNY and fewer working days compared to January. Correspondingly, the local gold price premium fell during the month. Meanwhile, local gold ETF holdings declined in February. It seems that many Chinese investors continue to act tactically in their gold ETF allocations: the rising gold price might have spurred profit-taking, contributing to the monthly outflow.
In India as well, following soft demand in January, retail demand further weakened in February. The sudden spike in the gold price following the geopolitical situation caught consumers off guard, resulting in the postponement of gold purchases during the second half of the month. This weakness in retail demand caused the local price discount to widen to $14-15/oz by the end of February, compared to a small premium of $1-2/oz in the first half of the month. Indian gold ETFs witnessed fractional outflows of 0.5t in February, primarily driven by the higher gold price, which may have led to profit-taking. Indian gold ETF total holdings decreased to 36.2t by month-end.
Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough&Polished
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