Gold Holds Luster in China as Imports From Hong Kong Rise

China’s net gold imports from Hong Kong increased 40 percent in May from a month earlier as the metal’s deepening slump continued to attract bargain hunters to bullion shops.

Mainland buyers purchased 106 metric tons during the month, after deducting flows from China into Hong Kong, compared with 76 tons a month earlier, according to calculations by Bloomberg based on data from the Hong Kong government today. Inbound shipments including scrap were 127 tons, from 75.6 tons a year earlier and 126.1 tons in April.

Gold dropped 6 percent in May after falling into a bear market in April amid concern the U.S. Federal Reserve would rein in stimulus that helped bullion cap a 12-year bull run. Mainland investors took the rout as an opportunity to snap up jewelry, coins and bars, while some consumers bought gifts early for festivals and weddings later in the year, according to the China Gold Association.

“Demand was quite strong in May with people rushing to gold shops because they thought prices had hit bottom,” Bruce Liu, gold trader at ANZ Bank China Co., said by phone from Shanghai today.

Bullion of 99.99 percent purity on the Shanghai Gold Exchange fell 5 percent in May, dropping for a fourth month, and was at 252.99 yuan a gram ($1,283 an ounce) today. In London, gold for immediate delivery traded at $1,234.27 an ounce, 26 percent lower this year.

Perth Mint

Exports of gold to Hong Kong from China were 21 tons in May, according to a separate Statistics Department statement, down from 50.2 tons in April, and compared with 32.7 tons in May 2012.

There are signs interest has slowed in other countries. Gold sales from Australia’s Perth Mint, which refines nearly all of the bullion mined in the country, declined for a second month in June as the falling prices deterred buyers.

The U.S. Mint sold 57,000 ounces of American Eagle gold coins in June from 70,000 ounces in May and 209,500 ounces in April, according to data on its website. In India, the largest user last year, imports may drop 52 percent in the third quarter after government curbs, according to the All India Gems & Jewellery Trade Federation.

Trading of spot bullion of 99.99 percent purity on the Shanghai Gold Exchange, China’s biggest market for bullion for immediate delivery, exceeded 20 tons every day from April 16 until May 3, when gold had its biggest drop in 33 years in the two days through April 15.

Biggest Consumer

Volume reached a record 43.3 metric tons on April 22. It climbed above 20 tons for two days through June 21 during the latest price decline, according to the exchange.

China may pass India as the largest bullion consumer as early as this year after the government in New Delhi raised import taxes while regulators in Beijing made investing in the metal easier, the China Gold Association said.

China approved its first two domestic exchange-traded products backed by gold last month. Huaan Asset Management Co. and Guotai Asset Management Co. are began marketing the ETFs to the public on June 24 and will close subscriptions on July 12.

China’s domestic gold consumption was 776.1 tons in 2012, down from 779.8 tons the previous year, according to the producer-funded World Gold Council. China and India account for more than half of global demand.

To contact Bloomberg News staff for this story: Jarrett Banks in Tokyo at jbanks15@bloomberg.net

To contact the editor responsible for this story: Brett Miller at bmiller30@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.