Gold Drops 1% as Stocks Rebound - 15 February 2016

Gold fell 1 percent on Monday, falling for a second straight session after hitting its highest in a year last week. Prices were pulled down by a rebound in stock markets and selling from China after the Lunar New Year holiday.

Thursday saw bullion climbing to a year-high of $1,260.60 while chaos in global equities fueled safe-haven demand for the metal, as well as for the Japanese yen and U.S. Treasuries. But Monday showed a reversal as Asian shares bounced back breaking a five-session losing streak with Shanghai stocks posting only modest losses after a week-long holiday.

Spot gold fell to a session low of $1,221.40, before cutting some losses to trade down 1 percent at $1,223.79 by 0311 GMT. It dropped 0.7 percent on Friday. U.S. gold futures dropped as much as 1.4 percent to $1,222.20.

One trader based in Australia believes that "Gold is lower because of the good bounce in equities and the Chinese selling. There is some profit-taking around but volumes haven't been huge."

Gold is about $60 an ounce higher than on February 5th when Chinese markets were last open, prompting investors to take profits.

Gold-Buying Spree

Some analysts point to China as being on a gold-buying spree with gold imports to China up over 700% since 2010, with the vast majority of gold heading into the mainland via Hong Kong.

According to John LaForge, head of Wells Fargo's commodities team, China now consumes about 40% of the gold that comes out of the ground every year and that Hong Kong data alone indicates that China went from importing just over 100 tons of gold in 2010 to just under 1,000 tons last year.

In addition to all the imports, China is also the world's largest gold miner, according to the World Gold Council.

Cina Coren
Cina Coren is a former Wall Street broker and financial advisor. She holds a Master's degree in Communications and spent many years writing for international news outlets and journalistic publications. Today, Cina spends most of her time writing internet articles and blogs, and reading various newspapers to stay on top of the news.