Tags: China | Gold | Imports | Soar | Inflation

China Gold Imports Soar Almost Fivefold on Inflation

Thursday, 02 Dec 2010 10:10 AM

China’s gold imports jumped almost fivefold in the first 10 months from the entire amount shipped in last year as concern about rising inflation increased its appeal as a store of value, said the Shanghai Gold Exchange.

Imports have gained to 209 metric tons compared with 45 tons for all of 2009, Shen Xiangrong, chairman of the bourse, told a conference in Shanghai today. The country is the world’s largest producer and second-biggest user.

Bullion soared 27 percent this year and is set for a 10th annual gain as the dollar dropped and investors sought a store of value on concern that the trillions of dollars governments are pumping into the global economy may debase the value of currencies. China has pledged to use price controls and may raise interest rates a second time this year to slow inflation that rose in October to the highest level since 2008.

“People there need to buy gold to hedge against inflation as the country’s tightening monetary policy drives investors from stocks and properties to gold,” said Hiroyuki Kikukawa, general manager of research at IDO Securities Co. in Tokyo. China’s demand will continue to grow, making the country one of the top importers together with India, he said.

Gold demand in China gained in the first half as government measures to cool the property market and falling equities spurred investment, the Shanghai Gold Exchange said July 7. About 70 percent to 80 percent the imports in the first 10 months were made into mini-gold bars, which Chinese investors like to hold, Shen said.

Inflation Expectations

Consumer prices jumped 4.4 percent in October, the fastest pace in two years, and above the government’s full-year target of 3 percent. China’s central bank raised interest rates in October for the first time since 2007 and ordered banks on Nov. 10 and Nov. 19 to hold more money in reserve.

“The expectation for higher inflation has fueled great interest among investors to hold physical gold, which led to higher imports,” the exchange’s Shen said.

Sales of gold products such as bars by China National Gold Group Corp., owner of the country’s largest deposit of the metal, jumped as much as 40 percent in the first half, Song Quanli, deputy party secretary at the company, said July 7.

Bullion for immediate delivery rose 0.3 percent to $1,392.25 an ounce at 11:33 a.m. in Shanghai after yesterday touching $1,397.50, the highest price since Nov. 12. The metal reached a record $1,424.60 an ounce on Nov. 9.

India Imports

Gold imports this year by India have already exceeded 2009 levels as consumers boost jewelry purchases, the World Gold Council said Nov. 17. Imports totaled 624 metric tons by the end of the third quarter, compared with 559 tons in all of 2009, according to the London-based industry group today.

“A possible interest rate hike in China won’t damp Chinese investor interest in gold,” Shen said. “Even if China adds 50 basis points, it would still be a negative interest rate environment given inflation is running at more than 4 percent.”

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China s gold imports jumped almost fivefold in the first 10 months from the entire amount shipped in last year as concern about rising inflation increased its appeal as a store of value, said the Shanghai Gold Exchange. Imports have gained to 209 metric tons compared with...
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2010-10-02
Thursday, 02 Dec 2010 10:10 AM
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