China's gold imports jump on investment demand as price falters

[BEIJING] China, the world's biggest gold consumer, increased bullion imports from Hong Kong in March as a global price rally stalled and local investment demand showed signs of recovery.

Net purchases climbed to 64.1 metric tons from 42.9 tons in February and 61.8 tons a year earlier, according to data from the Hong Kong Census and Statistics Department compiled by Bloomberg. The mainland bought nearly 76.3 tons compared with 55.1 tons a month earlier, while exports to Hong Kong were 12.1 tons from 12.2 tons. Mainland China doesn't publish the data.

China's gold consumption has been expanding as rising incomes and economic growth boost purchases of jewelry, bars and coins. The central bank has also been adding to its bullion holdings every month in a move to diversify its foreign-exchange reserves.

While gold has been one of the best-performing assets this year on haven demand, prices fell 0.5 per cent in March, trimming their advance in the first quarter to 16 per cent.

"From anecdotal evidence, we gather that retail sales of jewelry, bars and coins are quite good this year," Long Ling, an analyst at Industrial Futures Co, said by phone from Shanghai before the data were released.

A jump in physical deliveries from the Shanghai Gold Exchange and higher importsfrom Switzerland were signs of strong demand, Mr Long said. Withdrawals from the bourse climbed to 183 tons in March from 107.6 tons a month earlier, exchange data show. Swiss exports to China climbed to 29.5 tons from 27.2 tons the month before, according to the Federal Customs Administration.

Demand for bullion far outstrips local supply even though the country is the world's biggest producer. While Chinese people love gold and there is huge demand, consumption per person is still well below the global level, according to Xu Zhong, deputy director of the financial market department at the People's Bank of China, in Shanghai last week.

BLOOMBERG