China's net gold imports via main conduit Hong Kong slumped to a 17 month-low in January, as heavy purchases made in the previous months and higher bullion prices curbed demand. The fall in imports from the top consumer comes at a bad time for global gold prices that have rallied 16 percent this year amid a tumble in equities. Low import levels from China could undermine the rally.
China's net gold imports slid to 33.041 tonnes in January, the lowest since August 2014, according to data emailed to Reuters by the Hong Kong Census and Statistics Department. That is a sharp decline from December imports of 129.266 tonnes, the highest monthly purchases in over two years, and the 76 tonnes imported last January.
China typically imports heavily towards the end of the year to stock up for the Lunar New Year, which is celebrated at the start of a year and when bullion is popular as a gift. Imports tend to taper off after that, but the extent of the decline in January this year has surprised many. "I suppose the impressive numbers in December have something to do with it," said Zhirui Ji, an analyst with GFMS, a metals consultancy owned by Thomson Reuters, adding that the higher gold prices added to the woes. Imports in February are "very likely" to be as bad as January numbers, Ji said.
Spot gold prices have jumped nearly 11 percent this month, compared with a 5 percent rise in January. Jewellery demand, which accounts for a bulk of Chinese gold purchases, during the seasonally strong new year holiday took a hit, although demand for gold bars rose, a World Gold Council official said. Chinese demand has been dragged down by a slowing economy, Beijing's anti-corruption drive and bearish outlook on gold prices, which fell for three years to 2015 before rallying in 2016. The Chinese have in fact sold into gold's recent rally.
Consumers who bought gold over the past few years had their fingers burnt as prices fell by more than a third between 2013 and 2015. "I don't see much retail demand these days after the spring festival," said a trader with a bullion importing bank in China, adding that a lack of arbitrage opportunities were also hindering imports. Gold prices in China were largely on par with the global price, sometimes even at a discount, giving banks little incentive to import bullion.