China is on holiday, gold plummets
According to Goldman Sachs, ahead of the May Day holiday, Chinese traders sold nearly 1 million ounces of gold, almost completely reversing the positions bought last week, resulting in onshore total holdings falling 5% from historical highs. Spot gold today fell below $3,230 per ounce during the trading session, with an intraday decline of 1.77%
On Thursday, the Chinese market was closed for the May Day holiday, and spot gold fell below $3,230 per ounce during the session, with a daily decline of 1.77%.
According to Goldman Sachs commodity trader Adam Gillard, ahead of the May Day holiday, Chinese traders sold nearly 1 million ounces of gold through the Shanghai Futures Exchange and the Shanghai Gold Exchange, almost completely reversing the positions bought last week, resulting in a 5% drop in total onshore holdings from historical highs.
Although China's share of global open interest remains at a high level of about 40%, the upward momentum seems to have temporarily peaked.
A report released by Gillard earlier indicated that last Tuesday (April 22), driven by Chinese investors increasing their holdings by 1.2 million ounces of gold through the Shanghai Gold Exchange (SGE) and the Shanghai Futures Exchange (SHFE), gold prices reached a historic high of $3,500 per ounce, with trading volume hitting record levels.
As of the time of writing, the gold price decline narrowed to 1.53%, reported at $3,237.78 per ounce.
Goldman Sachs: The influence of Chinese traders on gold prices is underestimated
Gillard pointed out a key phenomenon: recent fluctuations in gold prices have almost all occurred around the opening hours of the Chinese market.
He explained that China's "disproportionate" impact on prices is due to their trading being executed during periods of lower liquidity throughout the day (Asian morning), which may trigger CTA trading signals outside of China—this also explains why gold prices plummeted to a two-week low during today's Asian morning trading.
Gillard emphasized the uniqueness of gold as a trading commodity in the report: gold is a "flow commodity," which does not have an equilibrium point, unlike oil or copper. What truly matters for gold prices is the extraction volume from the Western world (from central banks, Chinese imports (excluding the People's Bank of China), and purchases by other investors, etc.)
