UBS: Chinese gold demand to taper in 2014

"The current mood in China is certainly different to what it was earlier this year," says UBS upon returning from a fact-finding mission to the country to gauge gold demand. "The vast majority is not counting on the same level of appetite (for gold) as seen this year."

Part of the reason is an early Chinese New Year - meaning importers didn't wait for the calendar to turn before bringing in needed supply. But also there's classic deflationary pressure as buyers - used to recent price ranges - sit on their hands until a breakout to the downside occurs.

Separately, Axel Merk runs the numbers on the performance of a 70/30 portfolio - 70% in the S&P 500 and 30% in gold. Since 1971, it would have earned 9.8% annually, but with less volatility than owning the S&P alone (which rose an annualized 10.1%). By itself, gold gained 8.6% on an annualized basis.

"The takeaway should be that diversification with uncorrelated assets matters, as it is possible to substantially lower the volatility of a portfolio by adding an uncorrelated asset. That applies despite the fact that gold was more volatile than the S&P 500 since 1971," says Merk.

Precious metals are having a big session, gold +2.1% to $1,260 and silver +3% to $20.30.


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Comments (23)
  • jmjjmj1
    , contributor
    Comments (183) | Send Message
    read sell your golld cheap to us.
    10 Dec 2013, 03:13 PM Reply Like
  • New Low Observer
    , contributor
    Comments (2473) | Send Message
    When gold was projected to go higher, few were saying, "read: buy overpriced gold from us". Now it's a bear raid to enhance the institutions who are supposedly WILLING buyers of gold at the current price. If only it were so easy. Pavlovian.
    10 Dec 2013, 04:24 PM Reply Like
  • New Low Observer
    , contributor
    Comments (2473) | Send Message
    Finally talk of lower demand from China...maybe the price could start rising since when there were claims of rising demand from china the price fell.
    10 Dec 2013, 03:22 PM Reply Like
  • cn_habs
    , contributor
    Comments (544) | Send Message
    Why do you think it fell?
    10 Dec 2013, 04:41 PM Reply Like
  • ystock15
    , contributor
    Comments (165) | Send Message
    Doesn't matter, if we taper in March and the dollar weakens until then, the gold price will go up significantly higher than now. It jumps up 2.5% today as dollar's really cheap now, too cheap makes me worry. There might be time comes that you have last chance to get out of gold market if you want out
    10 Dec 2013, 03:22 PM Reply Like
  • ddearborn
    , contributor
    Comments (180) | Send Message


    Instead of quoting a source with a vested interest in falling prices why not quote someone in the Chinese government? After all it is the government which has been buying thousands of tons of gold over the last 3 years.


    How many articles on this website have we seen that talk about the absolutely massive gold buying binge the China has been on the last 4 years? It sure has been quiet. Now years after the buying spree started things are beginning to level off a bit and they are using this plateau to fuel speculation that gold is going to fall further. Where were all the articles saying with all that demand gold prices should have be rising in the face of record demand the last 2 years. The silence at least from this website speaks volumes.


    The author is trying use a more subtle approach. But it clearly yet another attack on gold. Wow what a surprise.
    10 Dec 2013, 03:43 PM Reply Like
  • Agent Graves
    , contributor
    Comments (147) | Send Message
    Barrick's top priority for 2014 is to sell their gold directly to the Chinese Reserve Bank.

    10 Dec 2013, 03:58 PM Reply Like
  • The_Hammer
    , contributor
    Comments (5044) | Send Message
    Agent great pickup. not surprising that most did not even care to notice the importance of your post.
    10 Dec 2013, 06:49 PM Reply Like
  • bfmil
    , contributor
    Comments (211) | Send Message
    I didn't think a week would go by without some gold bashing coming out of SA.
    10 Dec 2013, 04:05 PM Reply Like
  • filipo
    , contributor
    Comments (4648) | Send Message
    I wonder what the next "strong" argument will be.
    China going to mine and find gold in large quantities on the moon ?
    10 Dec 2013, 04:19 PM Reply Like
  • eagle1003
    , contributor
    Comments (1886) | Send Message
    Given that the tremendous Chinese demand for gold that we have been hearing about didn't do a thing for the price, maybe lower demand will do the opposite. Just a thought.
    10 Dec 2013, 04:23 PM Reply Like
  • The_Hammer
    , contributor
    Comments (5044) | Send Message
    the gold price is being set by london and comex paper gold trading right now but this is about to change.
    10 Dec 2013, 06:43 PM Reply Like
  • CDM Capital
    , contributor
    Comments (457) | Send Message
    Gold is coming out of a 13 year bull market and has plenty of room to fall further ($700-$800). History should guide the way this one moves for the next few years.

    10 Dec 2013, 04:44 PM Reply Like
  • Agent Graves
    , contributor
    Comments (147) | Send Message
    Mean reversion is a logical fallacy.


    Here you go:
    10 Dec 2013, 04:56 PM Reply Like
  • fourchan
    , contributor
    Comments (82) | Send Message
    "Chinese gold demand to taper in 2014"


    10 Dec 2013, 05:01 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (11168) | Send Message
    I hope this is true.


    I would love it if the Chinese were selling gold hand over fist.


    Prices collapse more as India tightens the import tariffs.


    U.S. stocks and yields continue to rise faster and faster slamming down gold even more.


    Gold penetrates under $400 per ounce as Jay Leno and David Letterman make fun of the "gold wackos" on TV.


    Then I stroll into my LCS and plunk down $4,300 for TEN 1 troy ounce gold Maple Leafs.




    A person can dream, right. :)
    10 Dec 2013, 05:03 PM Reply Like
  • manas11
    , contributor
    Comments (2) | Send Message
    Hilarious ! the same day gold jumps 2%, SA and UBS comes up with a headline (read - just speculation) to push down the price further. Some people really do hate gold.
    10 Dec 2013, 05:59 PM Reply Like
  • mmanager
    , contributor
    Comments (2) | Send Message
    I don't believe a word of it!!!!
    It is worth reading the Simon Popple article in Money Week (9th December) '' Why gold demand is understated'' and it quotes Koos Jansen a true expert on China's gold demand and the story is the reciprocal of what is stated here. I think that during the course of 2014 gold will reach and exceed the earlier high of 2011.
    10 Dec 2013, 05:59 PM Reply Like
  • Bi9b0ss
    , contributor
    Comments (4) | Send Message
    It is hardly a news, gold has been dropping, is dropping, and will continue to drop further for whatever reason. It is pretty normal after rallying for 13 years.
    10 Dec 2013, 05:59 PM Reply Like
  • phdinsuntanning
    , contributor
    Comments (1346) | Send Message
    as always gold is highly correlated to the price of oil, but the really valid "price" to me is oil/gold, not the distorted US dollar, euro or appreciated yuans or devaluating yens or AUDs. Moving all distractors out, an oil barrel costed you as much as 4.5 grams of gold in the last decade because of booming China, but today an oil barrel cost you less than 2 grams of gold, and on average 2.5 grams per barrel in the long term, but very volatile in recent years. This year you started paying 1.5 grams of gold per barrel of oil, and now you need almost 2.5 grams of gold to get the same oil, so oil is becoming much more expensive this, and there is a reason: probably countries are stockpiling oil for security reasons. Just look copper: it costed 1.4 Kg of gold to get a tonne of copper at the peak of Vietnam war, now is around 200 grams of gold...


    10 Dec 2013, 06:27 PM Reply Like
  • minecanary
    , contributor
    Comments (1234) | Send Message
    And on their fact finding mission to India, they said the people just decided they don't want gold anymore because Bennie doesn't understand it's allure
    10 Dec 2013, 06:42 PM Reply Like
  • happyguy
    , contributor
    Comments (238) | Send Message
    So who is the author of this stupid article. Is this you all have left in your ammunition when gold rallied today and there is a smell of taper around the corner and bond rates may go higher?
    11 Dec 2013, 12:21 AM Reply Like
  • nouzarc
    , contributor
    Comments (113) | Send Message
    UBS knows what the Chinese are doing? That's laughable.
    11 Dec 2013, 10:24 AM Reply Like
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