Gold, which is hovering around US$1,200 per ounce, may drop to US$1,100 in January or February, the president of the Chinese Gold & Silver Exchange Society (CGSE) says.
Two major factors behind the decline are the end of quantitative easing (QE) in the United States and the recent plunge in the oil price, Haywood Cheung said in an interview after a CGSE event Monday.
A rebound is likely around the time of the Lunar New Year, and a bull market could resume, lasting until the second quarter, Cheung said.
He expects China to increase its gold reserves to back the renminbi in its efforts to internationalize the currency.
Cheung said the eastward trend in gold demand, driven by mainland China, Taiwan, South Korea and India, will continue.
The US will start to increase interest rates next year, but Cheung said it is unlikely to do so aggressively, and the move will not have much impact on the gold price and the equity market.
The CGSE has received approval from the mainland authorities to establish a gold and silver trading platform in the Qianhai special economic zone in Shenzhen.
The platform, which will allow cross-border trading of gold products on the Shanghai and Hong Kong gold exchanges, is expected to be launched in next year’s second quarter.
A new bonded warehouse in Qianhai has been approved to support the trading platform. Cheung said the warehouse will have the capacity to store 1,500 tonnes of gold after construction is completed in about two years’ time.
The warehouse will create the opportunity for investors on the platform to arbitrage between onshore and offshore renminbi interest rates, he said.
Cheung also mentioned a strategic cooperation agreement signed earlier between the Shanghai Gold Exchange (SGE) and CGSE. It will allow CGSE’s international members and clients to trade directly on the SGE.
Details of the scheme will be announced in March or April after work on the required software is completed, he said.
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