China's September gold purchases leap sixfold
The spotlight is on the world's second largest gold consumer, China, with its record purchase of gold via Hong Kong and imminent policy changes to revitalise its gold sector.
Posted: Thursday , 01 Dec 2011
MUMBAI - -
The regulations passed by the Chinese authorities to encourage gold trading over the past year appear to be working. Gold purchases in China via Hong Kong hit a record 56.9 tonnes in the month of September, registering a six fold increase year on year.
Data from the Hong Kong government showed that the Chinese mainland imported about 140 tonnes of gold via Hong Kong in the July to September quarter, more than the roughly 120 tonnes for the whole of 2010.
Cheng Bing Hai, president of the Shanghai Gold and Jewellery Trade Association, has also been quoted by newswires as saying that total jewellery sales by the top three jewellers in Shanghai have already exceeded 100 tonnes so far this year.
According to available data, imports of gold and specie in September 2010 was HK$ 4317.3 million, while in September 2011, it was HK$ 19,500 million. Similar data from the external merchandise trade and trade in gold and specie showed that between January to September 2010, imports were HK$ 47629.9 million as compared to HK$ 102,808.1 million in the January to September 2011 period.
Domestic exports on the other hand were way lower. According to the Census and Statistics Department of the Hong Kong government, exports were HK$ 1814.4 million in September 2010 as compared to HK$ 8331.2 million (359.2%) in September 2011. Similarly, domestic exports between January to September 2010 were HK$ 34779.4 million as compared to HK$ 41298.7 million (18.7%) in the corresponding period of this year.
China has been encouraging its citizens to buy and hold physical gold, either in the form of jewellery, coins or bars. The Asian country also had widened the number of banks allowed to import gold and has been encouraging more gold investment through new exchanges and yuan denominated products. On June 28, China opened its first precious metals spot exchange.
Reports indicate China's aggressive promotion has pushed Chinese consumer demand for gold up 25% overall this year - much higher than the 7% global average. This is a far cry from the position in 2002, before which Chinese citizens were barred from owning physical gold under penalty of imprisonment.
That policy was dropped and the Shanghai Gold Exchange came into being. In mid October, a new Renminbi kilobar gold was launched, the world's first offshore yuan denominated spot gold contract. It started trading on Hong Kong's Chinese Gold and Silver Exchange.
Taking this a step further, the Ministry of Industry and Information Technology in China has plans to reform the gold sector in China by eliminating smaller gold smelters. The Ministry also has said it will support international gold prices in the long run. At a national gold industry meeting on November 28, the Ministry said it planned to shut down certain gold producers with smaller ore processing capacities.
In a major turnaround and for some time now, the government also has been airing news programmes on state owned television urging consumers to buy and sell gold and silver. Moreover, analysts say when China expressed its interest in purchasing $80 billion in gold (about 2600 tonnes), it profoundly altered the gold market's long standing synergy.
Analysts have said the country also has mounted an aggressive defense of its domestic gold mining industry. Its country's rising middle class and growing affluence will ensure that China's gold jewellery market nearly doubles to 955.2 tonnes by 2020, as compared with 519.6 tonnes in 2011, analysts added.
iPad Version: REUTERS/Claro Cortes