By: Lawrence Williams
November 1, 2013
China is maintaining its high gold import levels via Hong Kong with another 109 tonnes via this route recorded in September, 0.8 tonnes down on the August figure. But is this all the gold it imports?
There has been a fair amount of speculation in the press that Chinese gold demand may be slowing from its record levels recorded so far this year. Well we can report that the speculation is correct – marginally! Reading he latest Bloomberg headline relating to the newly released September figures out of Hong Kong “China Gold Imports From Hong Kong Fall on Premium, Slow Demand” one could be forgiven for thinking that the tide has indeed turned, yet, in reality, the September total for net gold imports from Hong Kong into mainland China at 109.4 tonnes remains the fifth highest month’s imports on record and although a full 0.8 tonnes below the previous month’s figure this hardly shows any kind of appreciable slowdown so far.
Indeed Chinese imports by this route over the first nine months of the year are more than double those of last year.
Again, if China’s net gold imports to date this year are extrapolated over the full year it suggests an import level of 1,109 tonnes – some 100 tonnes higher than the World Gold Council’s earlier estimate of the country’s likely overall imports this year. But, if the momentum over the past five months continues to the year end then Chinese imports would reach over 1150 tonnes, which together with its own domestic production would bring Chinese demand this year to around 1570 tonnes. This figure takes into account its own new mined gold output which is getting on for 60% of the global total of new mined gold.
China net gold imports from Hong Kong 2013
|Total year to date||832*|
*The actual figure may be a few tonnes higher at 836 tonnes if fractional values are taken into account
However, other estimates suggest that China’s annual gold demand may well be quite a bit higher. As we have pointed out here before, the Chinese government does not report total gold imports, and exports virtually none of its gold apart from to Hong Kong which is taken into account in the above figures. So we have to rely on the official Hong Kong figures as a proxy for the country’s imports. We believe it unlikely that imports via the former British colony represent the only route by which gold reaches the Chinese mainland, but any figure put on other gold imports would be pure speculation given the lack of any official data.
This all ties in with speculation that China may actually be surreptitiously building its gold reserves ahead of a future global reserve currency power play at some unspecified time in the future.
With Indian gold imports apparently picking up again ahead of Diwali (although there are contradictory reports on this apart from the recognition of very large price premiums to purchase the yellow metal there) we may well be at the position where China and India together account for close to the global total of newly mined gold. But they are not the only countries importing high volumes of gold – most Eastern, Middle Eastern and some FSU countries are seeing strong demand. Even with apparently declining continuing purchases from Central Banks which may not take up quite as much gold as predicted at the beginning of the year, then the pressures on physical gold supply would seem to be building strongly. How long this is sustainable without metal prices beginning to rise sharply, as demand for physical metal exceeds supplies available to the markets, has to be extremely questionable.
God Goliath is not your typical gold dealer.