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China’s government is likely the one behind the significant increase in gold imports that has made the country become the world’s second-largest consumer of the precious metal after India, reports Financial Times (subs. required).
Demand for the yellow metal in China has experimented a solid growth over the past four years to the point analysts predict the nation’s gold demand will beat supply by 2015, making it the world’s largest buyer by year-end.
China is already the world’s biggest gold producer and it has been so since 2007, with an annul output of 403 tons in 2012, a year-on-year growth of almost 12%.
The question is, says Evy Hambro —chief investment officer of BlackRock’s natural resources equity team, where all that gold is going.
“Is it going on to wrists, ears and necks or is it going into state reserves?,” he was quoted as saying in the interview with FT.
The Chinese government’s does not publish any gold trade data. The numbers from Hong Kong, a major conduit for gold into the mainland, are used to obtain a realistic estimation of the country’s trade in the precious metal.
Table from Zero Hedge.
And those figures aren’t minor. Imports from Hong Kong climbed to the second-highest level on record in October, as the country bought more than 100 tonnes of gold for a sixth straight month. For the first ten months of the year, imports totalled about 986 tonnes, more than double from a year-ago period.
The last official figure on record, provided by the People’s Bank of China in 2009, show the country’s bullion reserves standing at 1,054 tonnes. But based on global trade data, some analysts suspects China’s central bank has bought up to 300 tonnes of gold this year.
“I think we will need some clarity and that will really set the tone for gold in China in 2014,” Hambro told FT. ”If it does start to show that some of it has gone into state hands that will be very supportive for the gold market.”
Backing is really what the gold market seems to need. This year, the shiny yellow metal dropped 25% and is steadily heading for the first annual drop since 2000. Quite a few investors lost faith in gold as a store of value amid a rally in U.S. equities to a record and muted inflation.
Meanwhile, China has been easing rules this year regarding gold trade and investment. Other than ETF approvals, it has extended trading hours on its bullion exchange and introduced a draft plan to allow more banks to import the precious metal.
Image by Aniriana/Shutterstock.com
3 Comments
Diz
It would seem to me that China doesn’t release these figures because as Ms. Jamasmie points out, it would “be very supportive to the Gold markets”.. and that would push the price up… and they are very content to continue to snap up tons of gold at these ridiculously low prices caused by over-leveraged paper. This will be the doom of the West.
Anthony Maw
I agree with commenter Diz – US equities are in a massive QE-fuelled valuation bubble. As long as the supply of QE money never ends, the bubble will grow. The talk of “tapering” is already making some investors nervous. Meanwhile as the western gold ETF traders hammer down the price, the Chinese snap up the physical bullion at the nominal cost of production. We will wind up with the situation where the West has paper and the East has gold.
Fedanditspharohs
The west has leveraged paper some up to 40 x by some dealers against gold which has been sold several times over, what the banks and the criminal financial crooks at the bank of England are doing now is selling off their worthless paper gold for the fed’s worthless paper dollars and buying scarce items, which are all going up in price into their hideaway vaults and storage facilities, Lets not forget they are still storing actual physical gold and other precious metals surprisingly the only scarce commodity that’s going down in price. All the while the Chinese are dumping their dollars for 100s of tons of physical gold. Something’s got to give
The supply of gold has increased over the past two years by 180 million ounces.
As an increment to the existing stock of above ground gold, the percentage works
out to about 1.5%/year. In the meantime, the US monetary base increased 14%, or
an annual rate of 6.7%. In the words of former Supreme Court Justice Louis Brandeis, “sunlight is the best disinfectant.” Lets see this pyramid scam come to and end and those crooks banged up for a long time..