Gold futures start the week higher in early trading, up $5.60 to $1,268.50 per ounce. Gold closed last week higher, but price action remains range bound as investors are determining the severity of the myriad of factors affecting risk sentiment, including the slowdown in China and emerging market capitulation.
There might be a slowdown in the Chinese economy, but gold consumption expanded to record levels in 2013 as buyers came out to take advantage of gold’s first declining year in over a decade. The physical demand, in the form of bars and jewelry, in Asia is suggesting a shift of ownership from west to east. According to the China Gold Association, gold usage jumped 41 percent year-over-year to 1,176.4 metric tons. China, also, became the largest gold producer for the seventh consecutive year as output increased 428.16 tons, 6.2 percent. “The surge in Chinese gold consumption has helped to limit price declines,” said Duan Shihua, Shanghai Leading Investment Management Co.
As investors gauge whether or not risk assets will see a much larger decline, gold seen a 3.2 percent increase in January after slumping 28 percent in 2013. In comparison, the MSCI All-Country World Index of Equities fell 4.1 percent. Liu Xu, analyst at Capital Futures Co., said that “growing wealth is looking to gold as a means to store value.”