China’s Gold Imports From Hong Kong Climb to Record on Investment Demand

China’s gold imports from Hong Kong surged to a record as consumers bought the metal before the Lunar New Year this month and investors sought to hedge against financial turmoil. Bullion rallied to a four-week high.

Mainland China bought 102,779 kilograms from Hong Kong in November, up from 86,299 kilograms in October, according to the Census and Statistics Department of the Hong Kong government. China doesn’t publish gold trade data.

Demand for gold is climbing in China as investors seek to protect their wealth against slumping property prices and equity markets amid an inflation rate above 4 percent. The nation overtook India in the third quarter as the largest gold jewelry market, according to the World Gold Council. The country is also the biggest producer. Bullion rose as much as 0.9 percent to $1,647.45 an ounce today, the highest since Dec. 13.

China’s appetite for gold is very strong and growing,” said Tao Jinfeng, chief investment consultant at Haitong Futures Co., China’s largest brokerage by registered capital. “The few months before the Lunar New Year is typically the peak demand period for Chinese people.” The weeklong holiday begins Jan. 23.

Imports were profitable as prices in Hong Kong mostly traded at a discount to those in China in November. Gold for immediate delivery of 99.99 percent purity on the Shanghai Gold Exchange averaged 356.05 yuan a gram ($1,753 an ounce) in November, compared with an average of 434.68 Hong Kong dollars (353 yuan) at the Chinese Gold & Silver Exchange Society.

“There is always the possibility that some purchases were made by the central bank,” said Tao, rated the fourth-best China gold analyst in a Futures Daily and Securities Times poll.

Gold Reserves

The People’s Bank of China last made known its gold reserves more than two years ago, announcing that it held 33.89 million ounces, or 1,054 tons, as of June 30, 2009. Officials at the central bank weren’t immediately available to comment.

China’s holdings are the world’s fifth-largest by country, according to World Gold Council data. Central banks and government institutions bought 142 tons in 2010, International Monetary Fund data show.

As incomes rise, Chinese investors are looking for alternative investments as the Shanghai Composite Index tumbled 33 percent since 2009, making it the worst performer among the world’s 15 biggest markets, while home prices fell for a fourth month in December after curbs that included higher down-payment and mortgage requirements. Per-capita disposable income for households in towns and cities rose 14 percent to 16,301 yuan in the first three quarters of 2011.

Gold climbed 10 percent last year, rallying for an 11th year, as central banks joined investors in buying bullion to diversify assets. South Korea, Thailand, Turkey and Russia were among those who added gold to reserves in 2011.

Bullion for immediate-delivery in London, which reached a record $1,921.15 an ounce on Sept. 6, traded at $1,645.25 an ounce by 5:32 p.m. Singapore time today.

--Glenys Sim and Feiwen Rong. Editor: James Poole

To contact Bloomberg News staff for this story: Feiwen Rong in Beijing at frong2@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

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