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China’s June fall in gold imports relatively insignificant

Although China’s net gold imports via Hong Kong were lower in June than in May they only fell by a very small amount and are still near record levels.

It was interesting to read the Bloomberg article of yesterday entitled: China’s Gold Imports From Hong Kong Decline as Demand Slows.  On reading the headline one assumes that there may have been a substantial fall in imports through Hong Kong, but in fact China’s June net imports via Hong Kong fell by a paltry 4.8% from 106 tonnes in May to 101 tonnes – still the fourth highest monthly figure ever.  What the Bloomberg article also failed to point out was that the May figures were 40% higher than the April ones.  Thus, the slight fall in June represents little more than a tiny downwards blip in the continuing overall rise in Chinese imports of the precious metal.

The World Gold Council has gone on record with what seems to be a conservative estimate, given the high level of imports so far this year, that China will take in 1,000 tonnes of gold in 2013 and thus surpass India as the world’s largest consumer. 

See also: Slump in recycled gold rebalancing surplus market - WGC

Given the Indian government’s draconian clampdown on gold imports there it would be highly surprising if this were not the case anyway!

So far, in the first half of this year, China has imported a net figure of around 600 tonnes through Hong Kong alone.  (If it imports gold through other routes as well is not known as the only statistics available are those via Hong Kong, but it would not seem unlikely that there are other ports of entry.) If gold imports keep running at or around the current rate then the country is well on track to import around 1,200 tonnes or more this year, and with the country’s own production of some 400 tonnes, this would mean that China on its own will absorb around 60% of global output of newly mined gold in 2013.

Perhaps, though, the Bloomberg story should have focused on how little the country’s gold imports fell in June given the beginnings of the onset of gold investor fatigue after the supposedly euphoric buying surges seen in April and early May and given the continuing weakness in the gold price since then.  But despite this gold premiums in Shanghai are reported as remaining strong (gold was costing around $30 more than London spot there in July) indicating continuing strong demand continuing into the normally weak summer months.

It now remains to be seen whether the high levels of imports will hold in the second half of the year.  On past performance they will.  Last year, for example, according to a ZeroHedge chart China imported 383 tonnes in the first half of the year and 452 tonnes in the second half.

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