Gold bids pushed prices up to 1-week highs at $1220 per ounce on Wednesday, rising in London trade after China's financial markets re-opened to find bullion unchanged in Yuan terms from before the Golden Week began.
Shanghai's stock market bucked a drop in world equities to add 0.8%, but the drop in commodity prices continued, with Europe's Brent crude contract hitting new 27-month lows.
China's total retail sales for the week-starting 1st October – which saw 475 million people travel for holidays, up 10.9% on 2013 according to Beijing — rose 12.1% from Golden Week last year, the Commerce Ministry said.
Demand to buy gold and silver jewelry in the major city of Tianjin rose 40%, data showed, while the 22,000 square meter Hangzhou Department Store in the coastal province of Zhejiang saw gold sales more than double from the National Day week's holiday last year.
Traders returning to the Shanghai Gold Exchange today held premiums to buy gold some $4 per ounce above world prices, but volume in the most active gold contract was only slightly above September's daily average.
The new "free trade zone" contract for 0.9999 fine kilobars saw its strongest volume since launching three weeks ago, worth some $32 million and equal to 6% of the main domestic contract's turnover.
"It is difficult to attribute gold's move higher today to solely Chinese buying," says the Asian desk of Swiss refiners MKS.
"Rather, the continued U.S. Dollar weakness has most likely given the yellow metal a boost," it says, also pointing to the slowdown in services-sector growth reported today by HSBC's China PMI survey.
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What Swiss bank and major bullion market-maker UBS calls "decent" demand to buy gold jewelry during Golden Week was "likely driven by the drop in prices [and] could mean that the need to replenish [wholesale] inventories is rising."
"Ultimately what matters is what consumers and market participants in China think gold prices will do from here."
Short term, and having risen over 3.1% from Monday's new 2014 low, "Gold is nearing a first hurdle at $1224," says a note from technical analysts French investment bank Societe Generale.
"Toppish indicators [suggest gold] could undergo a short-term consolidation."
But with minutes from the U.S. Federal Reserve's latest policy meeting due out Wednesday, "the bullish outlook on the Dollar is likely to constrain any potential bullion rallies" in prices to buy gold, says fellow London market-maker HSBC.
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U.S. Treasury bond yields edged higher Wednesday ahead of the Fed minutes as prices fell for the first day in three. UK government gilt yields slipped to 1-year lows.
Meantime in India, where gold smuggling seizures have already surpassed full-year 2013 in the year to date, jewelers believe "people will throng to buy gold" as the peak festive season of Diwali approaches according to local press, "because prices have come down."
Hurt by mid-2013's imposition of bullion-sales bans and tight gold import restrictions, many retailers are planning "special offers", aimed at encouraging households in the world's former No.1 gold consumer nation to "buy as much gold as they can this festive season, keeping in mind the fall in prices," says one Jaipur dealer.
