Even with gold prices dropping to near 4-year lows, buyers in China - the world's leading market - aren't tempted, suggesting prices have further to fall.
When gold prices are in a slump, Chinese buyers, eyeing a bargain, traditionally move in and stop the rot. But that doesn't seem to be happening this time around. The current market decline has seen the price of gold lose more than a third of its value in two years, to around $1,173 an ounce.
Unusually, prices on the Shanghai Gold Exchange, the world's biggest platform for physical trade, are at a discount of around $1 an ounce to the global benchmark, slipping from premiums of $1-$2 an ounce last week. Since all physical gold trade in China goes through the exchange, it is seen as a reliable barometer of Chinese demand.
World gold prices are at their lowest since 2010 and slid $25 an ounce on Friday as the U.S. dollar strengthened, but Chinese buyers still aren't biting, predicting prices have further to drop.
There is little sign of increased demand, dealers at importing banks in China and traders told Reuters on Monday, recalling how China led a rush to buy jewelry and gold bars and coins when prices slumped about $200 an ounce in two days last year.
"We've not seen any significant physical demand on the back of this (price drop)," said Victor Thianpiriya, an analyst at ANZ in Singapore. "That's a worrying sign for prices as Chinese buying was really the only thing supporting the market on self-offs last year."
China overtook India as the biggest gold buyer last year, with consumers and investors buying record amounts of the precious metal as prices tumbled 28 percent after a 12-year rally. That splurge, along with uncertainty over gold prices and a crackdown on corruption, have dented China's appetite this year. Demand has dropped by more than a fifth in the first nine months of the year, according to the China Gold Association.
"Chinese demand was again a little disappointing considering how much lower we're trading," said Alex Thorndike, senior trader at MKS Group, referring to Monday's trading levels. The discounted prices are "clearly reflective of their lack of interest."