Chinese Gold Rush Underway

Commerzbank writes that the appetite for gold appears “undiminished” in China. “This is an almost unbelievably large amount given that gold demand totaled ‘only’ 832 tons in the whole of last year according to the China Gold Association. Admittedly, the China Mining Association estimates that gold production in China will grow by nearly 10% year-on-year to reach a record of up to 440 tons this year. This is not nearly enough to satisfy the growing demand, however. May and June must therefore have seen extraordinarily high levels of gold imports from Hong Kong.”  (via Kitco)

The following featured chart depicts the explosion in Chinese gold imports from Hong Kong since January 2012, during which China imported an astonishing 1,206 tonnes of gold – 20% more than the nation’s latest official gold holdings of 1,054 tonnes. In the first quarter of 2013 alone, China imported 372 tonnes from Hong Kong, or nearly what was imported through the entire first half of 2012.

China_Gold_Rush_2013

We should note that the country’s largest gold producer (China National Gold) expects gold demand to exceed 1,000 tonnes in 2013.

As readers of this site know by now, we have stressed the fact that gold demand is not necessarily a price driver. We are in the midst of a huge shift in which physical gold is moving from the West to the East (notably China and India). Apart from the emotional preference for gold (the so-called “love trade”) China is also experiencing a higher inflation rate compared to the US and Europe, as well as a faster expansion of the money supply (which is not to be confused with the monetary base).

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