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Thursday, July 24, 2014 2:35:45 PM
Gold Drops To Five-Week Low On Weak Chinese DemandFont size: A | A | A
2:16 PM ET 7/24/14 | Dow Jones
By Tatyana Shumsky
NEW YORK--Gold futures fell to a five-week low on Thursday after data showed Chinese demand for physical gold fell during the first half of 2014.
Gold for August delivery, the most active contract, fell $13.90, or 1.1%, to settle at $1,290.80 a troy ounce on the Comex division of the New York Mercantile Exchange. This was the first time gold closed below $1,300 since July 16, and its lowest settlement since June 18.
Gold prices are up 7.3% so far this year, helped by investor demand for a haven amid a slew of crises in eastern Europe and the Middle East.
But prices took a step back on Thursday after the China Gold Association reported a 19% drop in Chinese gold demand during the January to June period. Chinese demand for gold bars fell 62% during the January to June period, while gold coin demand dropped 44%, the trade group said.
"That's huge and it tells you that physical buyers stepped away from this market at these price levels," said Adam Klopfenstein, a senior market strategist with Archer Financial Services in Chicago.
Gold is a popular store of wealth in China, where many investors worry about high inflation. Last year, China became the world's top gold consumer and producer, edging out India for the first time.
The data worried gold traders because it could signal fewer gold purchases down the road as Chinese investors opt to hold other haven assets, Mr. Klopfenstein said.
"China isn't just a major source of demand, it's a major source of future growth in demand," Mr. Klopfenstein added.
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