China's imports of gold from main conduit Hong Kong fell to a 14-month low in April as importing banks were adequately stocked amid softer demand and a weaker yuan currency. The second straight monthly drop is a bad sign for gold prices as persistent weakness in the top importer of the metal could hurt prices. China has been a big support factor for prices recently, amid stimulus withdrawal in the United States and weak demand from No 2 buyer India.
Net gold flows into China from Hong Kong fell to 67.040 tonnes in April from 85.128 tonnes in March, data e-mailed to Reuters by the Hong Kong Census and Statistics Department shows. That is the lowest since February last year. Total gold imports from Hong Kong slipped to 80.817 tonnes last month from 105.855 tonnes in March.
"Banks have adequate stocks from imports earlier in the year, and in some cases, even last year, that they are waiting to dispose of," said a gold trader in Shanghai. "Any new imports will have to wait until they clear the backlog." Chinese banks imported a record 1,158.162 tonnes of gold from Hong Kong last year, when gold prices fell for the first time in 13 years.
Demand has now cooled from peak levels. That, combined with a weaker yuan, has driven Chinese gold prices to a discount to the global benchmark. The Chinese currency has lost 3 percent against the dollar this year, wiping out all its 2013 gains to become one of the worst emerging market performers. China's central bank engineered a sharp fall in the yuan this year to shake out speculative money. Chinese gold prices were at a discount to the global benchmark for most of March and April as a weaker yuan curbed some buying interest.
The discounts were also preventing banks from getting rid o their stock as it would not be profitable to do so. Chinese prices are now at a premium of about $3 an ounce to global prices. A banking source had earlier told Reuters the cost of importing and delivering gold into China was between $2.50 and $3 an ounce, a figure that premiums would have to exceed before banks resume buying aggressively.
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