| Global Times | 2013-4-17 23:23:02
By Wang Xinyuan
Consumers and investors rushed to buy gold after the precious metal posted its biggest one-day percentage drop in 30 years Monday, but analysts warned Wednesday that the gold price may still be hovering above the bottom.
"Do not join the buying spree as the gold price has not yet bottomed out," Wang Ruilei, chief analyst at Chengdu-based Boyin Precious Metal Investment Co, told the Global Times Wednesday.
The gold price is expected to fall further to as low as $1,150 an ounce, though it is likely to linger for a while at the current price level, Wang said.
The price of the precious metal reached $1,381 an ounce on the COMEX division of the New York Mercantile Exchange at 3:41 am Wednesday local exchange time, rebounding by 1 percent from the previous trading day. It had fallen by 5.2 percent on Friday and further plummeted 9 percent to $1,347.4 an ounce on Monday, the biggest daily loss percentage since 1983.
In China, the gold price of Au99.99 rose 1.86 percent to 276.5 yuan ($45) per gram on the Shanghai Gold Exchange Wednesday, its first slight rebound after the price plunged a combined 10 percent on Monday and Tuesday.
The plunging gold price spurred a huge buy by consumers, media reported. A total of 20 kilograms of gold bullion worth more than 6 million yuan sold out within two hours on Saturday at Beijing Guohua Department Store, leaving late-arriving customers empty-handed, China's Central TV reported Wednesday citing the store.
An enthusiastic customer even spent over 1 million yuan to buy 40 100-gram gold bars in a one-off shopping spree at China National Gold Group's Nanjing branch on Tuesday, and advance orders for gold bullion totaled 50 to 60 kilograms over Monday and Tuesday, equal to one month's worth of sales, business portal ifeng.com reported on Tuesday.
Financial investment rather than real demand for physical gold determines the gold price, and the gold price freefall on Monday is a reflection of financial institutions selling safe-haven gold in order to invest in the high-return stock market, Wang said.
The gold rout stemmed from worries Cyprus and perhaps other nations may become sellers of the precious metal, according to media reports.
"In view of the strong demand for physical gold, the possibility of a further substantial plunge is small," Zhang Bingnan, vice chairman of the China Gold Association, told the Global Times Wednesday, noting that the market mainly depends on the strategic choices of hedge funds and large financial institutions.
"It is better to adopt a wait-and-see attitude toward gold investment until things become clear. Even if you buy in, be cautious on risk control," Zhang Chengbao, an individual investor in gold trading, told the Global Times Wednesday.
By leaving a comment, you agree to abide by all terms and conditions (See the Comment section).