Tuesday, November 8, 2011

Chinese Purchases of Gold Leap Six Fold, as Country Purchases as Much Gold in 1 Month as Almost Half of 2010

Looks like with the relatively small dip in gold prices (considering the move the past 3-4 years), the Chinese swooped in to load up in September.  In September alone, they bought as much as they did during half of 2010, the FT reports.  With the U.S. working overtime since 2008 to trash its currency, and Europeans most likely eventually forced to, this looks like a logical move.  Also keep in mind how small of a horde of gold has relative to other countries. [Oct 13, 2009: Largest Gold Reserves by Country]

As important for investors, it is good to have such a large buyer providing a floor in the metal.

  • 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 September, gold fell to a three-month low of $1,534 an ounce later in the month. Chinese investors snapped up the metal as prices fell.
  • Analysts expect the September import surge to continue until the end of the year as Chinese gold buyers snap up gold in advance of Chinese New Year, China’s key gold-buying period.  “In September we saw some bargain hunters come back into the market on the price dip,” said Janet Kong, managing director of research for CICC, the Chinese investment bank.
  • 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 jewelry. 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 metric tons in September, a sixfold increase from 2010. Monthly gold imports for most of 2010 and this year run at about 10 metric tons, but buying jumped in July, August and September. In the three-month period, China imported from Hong Kong about 140 metric tons, more than the roughly 120 metric tons for the whole 2010.
  • China has liberalized regulations for importing gold over the past year, widening the number of banks authorized to import gold. “China’s gold demand will continue to increase as per capita income increases,” said Shi Heqing, a Beijing 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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