Commerzbank: Strong ETF gold inflows offsetting weak Chinese, Indian demand

New York (May 26)  Strong inflows of gold into exchange-traded funds are more than offsetting unusually weak demand from key consuming nations China and India, said Commerzbank analyst Cartsen Fritsch. Data from Hong Kong’s Census and Statistics Department on Monday showed that China exported more gold to Hong Kong (14.5 metric tons) last month than it imported from there (4.2 tons). Thus, Chinese gold imports from Hong Kong were negative for the first time since records began in 2007. “Normally, Hong Kong serves as the leading import hub for gold to China because Chinese gold demand significantly exceeds domestic supply,” Fritsch said in a research note. “However, Chinese households have been buying virtually no gold because of the corona crisis and record-high local prices.” China’s imports during the first four months of 2020 were just 17.1 tons, down 89% from the same period last year, Fritsch continued.

Meanwhile, he pointed out that gold demand in India has also been weak, with April imports grinding completely to a halt. “This underlines just how much gold demand and the gold price depend at present on demand for gold ETFs, which has remained extremely robust recently,” Fritsch said. “This month alone, more than 120 tons of gold have flowed into the gold ETFs tracked by Bloomberg. This is significantly more than is normally imported by China and India combined.”

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