(Kitco News) - The sharp downturn in China’s equity markets and real estate sector is contributing to strong gold sales ahead of the Lunar New Year, and other currencies provide clues about when gold will hit new highs in USD, according to Phil Carr, cofounder of GSC Commodity Intelligence.
Gold traders and investors are closely watching consumer purchases in China as the world’s largest precious metals market gears up for the Chinese New Year (CNY) celebrations. CNY will fall on Saturday, Feb. 10 this year, beginning the year of the Wood Dragon, with Chinese workers enjoying a holiday week off from Feb. 10-17.
Carr said the firm sees Chinese investors, households, and financial institutions “piling into Gold at one of the fastest paces seen since the Global Financial Crisis as the country’s stock market and real-estate sector continues to sink deeper into economic meltdown,” with equities experiencing one of the worst starts to the year on record.
“China’s market mayhem has dragged the country’s benchmark CSI 300 equity index down more 30% YTD – wiping out a staggering $6 trillion in market value from its peak reached in 2021,” he said. “But that’s just one symptom of a much bigger problem. The lack of alternatives and the fact that it’s become a lot more difficult than it was a few years ago to get your money out of China and invest elsewhere – has supercharged Gold’s appeal as the ‘go-to’ safe haven and store of value in times of uncertainty.”
Carr said China’s insatiable appetite for the precious metal, along with consistently strong demand from central banks, “helped push the price of Gold to all-time record highs in December and has kept prices firmly above $2,000 an ounce this year – ultimately setting a new floor for the market.”
He pointed out that gold continues to trade at or near all-time highs in many global currencies, and said “the big question now is will Gold priced in US dollars be next to hit fresh all-time highs?”
Carr believes that gold’s price performance across currencies in 2023 can provide clues as to when new USD highs may happen.
“Last year, Gold priced in multiple currencies set new all-time highs by an average of 100 days prior to Gold price denominated in US dollars,” he wrote. “If this is a leading barometer for predicting the performance of Gold prices as a whole, then this ultimately means one thing. Higher Gold prices are coming!”
Gold hit all-time highs in many of the world’s major currencies, including the Chinese yuan, the Indian rupee, and the Japanese yen, on Dec. 27. If the 100 days trend proves correct, new U.S dollar highs would occur on or near April 5, which would also be very close to the upcoming Bitcoin halving.