Chinese Gold Versus World Market Surges Again After Holiday Week

(Bloomberg) — Gold in China jumped to trade at the second-highest premium on record against the international benchmark, as mainland markets reopened following the Golden Week holiday.

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The Shanghai spot price was more than $112 an ounce higher than levels seen in London on Monday, according to Bloomberg calculations based on exchange data. The gap between the two markets has only been wider one other time, when Chinese prices last month blew out to trade at a premium of more than $120 over London as Beijing restricted shipments in a move that squeezed the market.

Meanwhile, the international benchmark tumbled last week as the metal came under pressure from a sell-off in global bonds, further exacerbating the widening gap between Shanghai and London.

Investors are keeping a close eye on the Shanghai Gold Exchange amid heightened volatility in the past few weeks. Prices there suddenly dropped off a cliff just before the market was due to close for the holiday, with authorities said to have recently issued a fresh round of import quotas in a move that helped ease tightness in the local market amid robust demand from consumers.

Yet the precious metal on Monday rose as high as 2.7% on the Shanghai Gold Exchange — the biggest jump in almost seven weeks — in a signal of still persistent appetite. That compared to a gain of as much as 1.2% for the international benchmark due to haven buying in the wake of the Hamas attack on Israel.

Many Chinese buyers are flocking to gold as a refuge from the impacts of a weakening currency and an increasingly uncertain economic outlook, Bloomberg economists David Qu and Chang Shu wrote in a report last month.

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