China’s September gold imports jumps sixfold

Chinese gold imports from Hong Kong, a proxy for the country’s overall overseas buying, leapt to a record high in September, when monthly purchases matched almost half that for the whole of 2010. The buying spree follows a sharp drop in the price of the precious metal. After hitting a nominal all-time high of $1,920.30 a troy ounce in early September, the yellow metal fell to a three-month low of $1,534 an ounce later in the month. Chinese investors snapped up the metal as prices fell. China is the world’s second largest gold consumer and demand has grown rapidly over the past year as Chinese investors buy gold to hedge against inflation and consumers buy more gold jewellery. 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. Data from the Hong Kong government showed that China imported a record 56.9 tonnes in September, a sixfold increase from 2010. Monthly gold imports for most of 2010 and this year run at about 10 tonnes, but buying jumped in July, August and September. In the three-month period, China imported from Hong Kong about 140 tonnes, more than the roughly 120 tonnes for the whole 2010.

The last two months of this year are likely to see China’s gold imports surge further ahead of Chinese New Year, supporting gold prices, according to Ms Kong. “We’ve noted a quite strong seasonality in gold prices, typically prices go up in the months before the Chinese New Year.” Investment demand for gold in China has been particularly strong this year as a hedge against inflation. Chinese bank deposits offer negative real interest rates, and other outlets for investment have been limited as Beijing has curbed property sales and the stock market has performed poorly. China has liberalised regulations for importing gold over the past year, widening the number of banks authorised to import gold. “China’s gold demand will continue to increase as per capita income increases,” said Shi Heqing, Beijing-based analyst with Antaike. “There aren’t many investment channels available in China other than the stock market, property market and some commodities”.

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