Dillon Gage: Surge in Chinese Imports Good Sign for Gold Posted by Adam King on February 20, 2013
A surge in imports of gold to mainland China from Hong Kong nearly doubled last year to a record level as incomes in the country rose and investors continued to move to hard assets such as gold and silver bar and coin. The Chinese appetite for gold continues to grow and regulators may launch gold Exchange Traded Funds. Dillon Gage Metals, international wholesalers of precious metal investment products, urges investors to keep an eye on China as new investment opportunities unfold for gold.
Terry Hanlon, president of Dillon Gage Metals, said rising demand in China is evidence that the upside for gold has hardly run its course. He added that Chinese investors bargain hunted last year, and took advantage of gold prices that were below a record $1,895 per troy ounce in 2011.
During 2012, China imported 834.5 metric tons of gold, which included scrap gold and coins, against the 431.2 tons imported the year before, according to Hong Kong’s Census and Statistics Department. Chinese imports in December 2012 reached a monthly record.
The economic growth in China has boosted the nation’s demand for gold as well as other hard commodities, including copper, energy, and soybeans, said Hanlon. Now, with 1.3 billion people, China replaced India last year as the world’s largest gold consumer. Official data from both the U.S. and China shows that China has surpassed the U.S. to become the top trading nation, as measured by all exports and imports.
The Chinese investors appear to mainly buy gold bars, which allow them to use the metal as a store of value to hedge against risk during sluggish stock markets and rising inflation.
China’s central bank has been pushing for gold to be included in a possible new International Monetary Fund super currency. World financial leaders have been considering a super currency, based on a basket of national currencies and possibly gold, for many years and much more so following the financial crises of the 2008-2010 era.
The Chinese government does not publish its actual gold buying, with holdings voluntarily reported every fifth year. The nation’s official holdings were 1,054 tons in 2009 and should be updated in 2014.
Next year, official holdings of Chinese gold are expected to be well above their level five years earlier but below current official U.S. gold inventories of over 8,100 tons.
Chinese investment in the gold market could prove to be a serious driver of the gold price in the U.S.