COLUMN-Gold gets initial lift from China virus, but may take longer-term hit – by Clyde Russell (Reuters U.S. – January 30, 2020)

LAUNCESTON, Australia, Jan 30 (Reuters) – One of the few beneficiaries from the outbreak of a deadly new coronavirus in China has been gold, which is fulfilling its customary role as a safe haven. But the epidemic may actually end up being bad news for the precious metal.

Gold market watchers, particularly those in the Western world, tend to focus heavily on risk-on, risk-off sentiment swings and subsequent flows into, or out of, gold investment products, such as exchange-traded funds (ETFs).

While this is a valid method of assessing investor interest in gold, it also ignores the fact that about half of the physical gold market is made up of just two countries, China and India.

Gold demand in those two heavyweights is already struggling amid slower economic growth and higher bullion prices, with China’s jewellery demand dropping 8.6% to 629 tonnes in 2019 from a year earlier, according to figures from GFMS.

China’s investment demand was better, increasing 1% in 2019 to 235 tonnes, aided by uncertainty over the trade war with the United States. But the overall picture for China was one of weakness in gold demand last year, and it’s virtually certain that the outbreak of the virus won’t help retail demand, given the likely hit to the Chinese economy and to consumer confidence.

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