Chinese gold imports double-up on a year ago as China becomes world’s largest consumer of gold

Posted on 06 February 2013 with 3 comments from readers

China replaced India sometime last year as the world’s largest consumer of gold and gold imports to mainland China from Hong Kong are presently running at more than twice the amount recorded a year ago.

According to data produced by Bloomberg gold imports from Hong Kong jumped by 94 per cent to 834.5 tonnes in 2012 with a monthly record of 114.4 tonnes in December. China is also the world’s largest gold producer but that has not been enough to satisfy its ravenous appetite for the yellow metal.

New gold champions

It was only a year ago that gold traders in the Sharjah Old Gold Souk told ArabianMoney that their biggest buyers were the Chinese looking to get out of the US dollar (click here). Gold is also a diversification against the risk that the Chinese economic miracle will one day run out of steam and local asset bubbles deflate.

We don’t really accept the argument offered by Bloomberg that the surge in gold consumption is simply down to the fact that the Chinese are getting wealthy.

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GDP growth is a fraction of the advance seen in gold consumption last year.

The Chinese read the same financial pages as everybody else and want to hedge against the rising risk of a bond market crash, just like many other investors. Their central bank has been pushing for gold to be included in a new IMF super-currency.

But they do appear to have been opportunist in taking advantage of the bargain gold prices available last year, with gold off its all-time high of $1,923 set back in October the previous year. The smart money has been moving into real assets (they are also buyers of Dubai property, for example) to diversify risk and the central bank will almost certainly emerge as the biggest buyer of gold.

Undercover buyers

Chinese gold buying is inscutable and often kept hidden for as long as possible. Bloomberg’s economists have done well to collate this data now to show this major change in global gold consumption.

Where do we go from here? Will the Chinese consumption of gold double again this year? Will it impact on the gold price? Well the trend is definitely up and not down and China is likely to get its first gold ETFs this year (click here).

As we have remarked before the advent of ETF investment for gold is likely to be big news for China’s 1.3 billion population. But as it happens gold imports have already doubled in advance of the gold ETFs.