Mainland buyers purchased 101 metric tons, after deducting flows from China into Hong Kong, compared with 106 tons a month earlier, according to calculations by Bloomberg based on data from the Hong Kong statistics department yesterday. Inbound shipments including scrap were 113 tons, from 127 tons in May.
Gold is heading for its first annual decline in 13 years as investors lose faith in the metal as a store of value and amid speculation the U.S. Federal Reserve will curb debt-buying. The metal dropped to a 34-month low in June, after tumbling 13 percent in April and May. That discouraged bargain hunters, said Wang Weimin, an analyst at Dalian Fortune Futures Co. China is the world’s second-largest bullion user after India.
“Gold’s been part of the commodity-finance trade, which was a popular way of taking advantage of the higher interest rates on the mainland,” Wang said before yesterday’s data was released. Some traders used gold to back foreign-currency loans from banks in Hong Kong, then repatriated cash to the mainland and converted it into yuan, before the crackdown reduced the practice trade, he said.
Investors refrained from bullion investments in June after they rushed to buy in mid-April, only to find that prices dropped further, Wang said. While gold for immediate delivery in London dropped as low as $1,321.95 an ounce in April, June’s lowest price was $1,180.50. It traded at $1,292.85 at 5:24 p.m. in Shanghai yesterday.
Bullion of 99.99 percent purity on the Shanghai Gold Exchange slumped 14 percent in June, falling for a fifth month. Volumes for the benchmark spot contract were 12 tons on Aug. 1, compared with a record 43 tons on April 22.
The Shanghai Gold Exchange, China’s largest bullion bourse, delivered 1,098 tons to buyers in the six months through June, compared with 1,139 tons for the whole of last year, according to data from the bourse on July 15. That was more than double the output in China, the world’s largest producer, which reached a record 403 tons last year.
China’s purchases in June were nearly twice the 68 tons in the same month last year, according to the data from the Hong Kong statistics department. Mainland China doesn’t publish such data.
Exports of gold to Hong Kong from China were 12 tons in June, according to a separate statistics department statement, down from 21 tons in May, and compared with 27 tons in June 2012.
To contact Bloomberg News staff for this story: Feiwen Rong in Beijing at email@example.com