China’s gold imports from Hong Kong slumped in April from a record as banks failed to get quotas fast enough to meet surging demand from mainland buyers keen to purchase bullion as prices fell into a bear market.
Mainland buyers purchased 126,135 kilograms, including scrap, compared with 223,519 kilograms in March, according to Hong Kong government data yesterday. Net imports, after deducting flows from China into Hong Kong, were 75,891 kilograms, from 130,038 kilograms a month earlier, according to Bloomberg calculations.
Gold slid into a bear market in April and had its biggest drop in 33 years in the two days through April 15 on concern that the U.S. Federal Reserve may rein in stimulus that helped bullion cap a 12-year bull run in 2012 and as investors dumped holdings in exchange-traded products backed by the metal. Quotas were in short supply after imports reached a record in March. Only qualified banks that secure quotas from the Chinese central bank can import gold to the mainland.
“Some qualified banks used up their gold import quota in the first three months and weren’t able to get the paperwork done fast enough to bring in bullion in April,” said Tian Rui, vice president of the precious metals division at INTL FCStone Trading Co. “We might see higher imports in May because demand surged after the rout.”
Bullion of 99.99 percent purity on the Shanghai Gold Exchange dropped 7.4 percent in April, and was at 278.55 yuan a gram ($1,414 an ounce) at 9:22 a.m. local time.
Spot gold for immediate delivery traded at $1,399.20 an ounce at 9:22 a.m. Shanghai time today and has declined 17 percent this year.
China’s purchases in April were 22 percent higher than the 103,644.5 kilograms in the same month last year, according to the data from the Hong Kong Census and Statistics Department. Mainland China doesn’t publish such data.
Exports of gold to Hong Kong from China were 50,244 kilograms in April, according to a separate Statistics Department statement, down from 93,481 kilograms in March, and compared with 37,316 kilograms in April 2012.
Volumes for the spot contract on the Shanghai Gold Exchange, China’s biggest cash bullion market, topped 323 tons between April 16 and May 3, according to data compiled by Bloomberg. The trading volume exceeded 20 tons every day from April 16 to May 3, when prices fell to the lowest since August 2010. That’s more than four times the daily average in 2012. Volumes reached a record 43,272 kilograms on April 22.
The premium gold buyers in China pay to take immediate delivery of bullion jumped four-fold as consumers swarmed jewelry shops after prices plunged by the most in three decades.
In the 12 months through April 12, before the rout, gold for immediate delivery in China traded at an average premium of $7.22 an ounce to the prevailing global counterpart, according to the Shanghai Gold Exchange data. The premium has averaged $31 an ounce since mid-April, as physical demand surged, and was at $14.07 at 9:23 a.m. today in Shanghai.
Still, gold demand in China, the world’s largest consumer after India, may slow after surging in April, said Zhang Bingnan, secretary-general of the China Gold Association.
“The kind of frenzied buying in late April and early May won’t be repeated,” Zhang said on May 28, adding that some of the jewelry demand earmarked for festivals or weddings later this year may have been brought forward to April and May after prices fell.
China’s domestic consumption totaled 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.
— With assistance by Feiwen Rong