Gold prices are continuing to drop this week. However, even with gold prices dropping to near 4-year lows, buyers in China, the world's leading market aren't tempted to buy, suggesting prices have even further to fall.
When gold prices are in a slump, Chinese buyers, eyeing a bargain, traditionally move in and stop the drop. But that doesn't seem to be happening this time around. The current market decline has seen the price of gold lose more than a third of its value in two years, to around $1,173 an ounce.
Prices on the Shanghai Gold Exchange, the world's biggest platform for physical trade, are at a discount of around $1 an ounce to the global benchmark, slipping from premiums of $1-$2 an ounce last week. Since all physical gold trade in China goes through the exchange, it is seen as a reliable barometer of Chinese demand.
"Chinese demand was again a little disappointing considering how much lower we're trading," said Alex Thorndike, senior trader at MKS Group, referring to Monday's trading levels. The discounted prices are "clearly reflective of their lack of interest."
World gold prices are at their lowest since 2010 and slid $25 an ounce on Friday as the U.S. dollar strengthened, but Chinese buyers still aren't biting, predicting prices have further to drop.