Last updated:December 12, 2011 8:08 pm
Chinese gold imports from HK hit record
By Leslie Hook in Beijing and Jack Farchy in London
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Chinese gold imports from Hong Kong, a proxy for overseas buying, hit a fresh record high in October and accounted for more than one-quarter of global demand.
Data from the Hong Kong government showed that China imported 85.7 tonnes of gold via Hong Kong in October, up 50 per cent from the previous month and up more than 40 times from October last year. It is the fourth consecutive month that China’s gold flows through Hong Kong have hit new highs.
Tom Kendall, precious metals analyst at Credit Suisse in London, said: “It is a big but credible number as the price arbitrage between London and Shanghai was definitely favourable for Chinese imports during late September and throughout October.”
In September, gold on the Shanghai Gold Exchange briefly traded $50 an ounce higher than the main global market based in London, a record price difference that encouraged imports.
China’s demand for gold has been surging this year as Chinese buy more gold jewellery and gold bars. Gold bars are popular investments as a hedge against inflation, and because the Chinese face limited options for other investments given China’s negative real interest rates on bank deposits and wobbling property prices.
Mr Kendall predicted overall Chinese imports of 470-490 tonnes for the full year, up from 245 tonnes last year. Some traders believe China’s imports could hit 500 tonnes, more than the production of Australia and South Africa combined.
However, analysts said that buying from China and other emerging economies had fallen sharply since October, as the weakness of their currencies against the dollar had made gold more expensive. The difference between London and Shanghai gold prices has fallen to almost zero.
The price of gold on Monday fell 2.7 per cent to $1,664.19 a troy ounce amid concerns about a tailing off of emerging market consumption, together with a downbeat market assessment of the outcome of last week’s European leaders’ summit.
China’s key gold-buying period is around Chinese New Year, which falls at the end of January, and China’s gold shops are already filled with dragon-emblazoned gold bars, coins, and figurines to give as gifts for the year of the dragon. Beijing has also encouraged the use of gold as an investment tool for Chinese savers given the limited investment options and China’s closed capital account.
China is the world’s second-biggest consumer of gold, after India, but is expected to take the top spot soon. This year China’s imports via Hong Kong during the first 10 months of the year are more than three times higher than the same period last year.
Beijing does not publicly disclose its gold imports, but analysts consider the Hong Kong import figures a good directional proxy for the country’s total gold overseas buying.
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