Gold premiums in China are expected to fall, according to Albert Cheng, managing director of the World Gold Council’s (WGC) Far East office, as the Chinese government prepares to open up the market to more importers April 1.Chang made the comments Wednesday in an interview with the Wall Street Journal. Last week, the People’s Bank of China announced that it would expand the number of import licenses to a wider range of participants. Currently China allows 15 banks to import gold but the new changes will allow domestic miners to bring precious metals into the country from their overseas assets.
According to the Wall Street Journal, because of the lack of importers, Chinese gold buyers have often have to pay premiums more than $10 above international rates during peak buying season.
“There will be more competition and that will drive down premiums,” Cheng said in the interview.
However, lower premiums might not result in higher consumer demand. Cheng said that they are not to see an increase in imports as a result of the changes. Currently, the WGC expects China to import 900 tonnes of gold in 2015, up 11% from last year.
According to analysts, Chinese gold imports fell in 2014 because of high stockpiles of onshore supply, which is also something the central bank is looking to control. Along with the wider import regulations, the Central bank said that they will be able to restrict “gold and gold product imports and exports in accordance with the requirements of national macroeconomic adjustments.”
Bernard Dahdah, precious metals analyst at Natixis, said in a report published Thursday that this is part of China’s larger plan to increase its influence in the gold market.
“Over the past two years, China has been gradually opening its gold market in the hope that it would become one of the world’s main gold trading hubs,” he said. “In 2013, China allowed foreign banks to import gold and launched gold-backed exchange traded funds.”
Chinese Gold Demand So Far Okay For 2015
Most analysts have described strength of the Chinese gold market as decent, as it remains near historical highs but down from the unprecedented demand seen in 2013.
According to Hong Kong government export statistics, Natixis said that gold exports from the island to mainland China was 65.8 tonnes in February, down 40% compared to 2014.
“Chinese demand for the metal has been suffering from weak investment demand and a clamp-down on corporate gift giving,” said Dahdah.
According to research from Macquarie, gold imports last month totaled 122 tonnes, up 10% from January but down 33% from 2014.
During the first two months of the year, ahead of the Lunar New Year celebration, the Australian-based bank said that demand was down about 30% compared to 2014.
“This sounds like a steep decline, although we would note that period of 2014 was rather exceptional, and February 2015’s level is still high historically,” they said. |
