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Chinese Gold Demand Weakens, India’s Remains Consistent In April

(Kitco News) - According to the latest Swiss and Chinese trade data physical gold demand is dropping, but according to some analysts this should not be a major concern for the global market.

In a research note from UBS, Thursday, commodity analysts Edel Tully and Joni Treves said that Swiss gold exports fell to 143.92 tonnes in April, a decline of 36% from the previous month but a rise of 30% compared to April of 2014.

They noted that the decline in gold exports also coincided with Hong Kong trade data as gold exports from the island to mainland China dropped to 46.64 tonnes, down 25% from March and down 29% from the previous April.

Turning to India, UBS said they estimate that India imported 81.09 tonnes of gold last month, down 38% from March but twice the amount of gold imported last year. They added that last month’s import data is in line with the average over the past 10 years.

However, the analysts added that the drop in gold imports and exports is more a reflection of seasonal factors than underlying fundamental weakness.

“Historical activity on the SGE suggests volumes are typically muted in the second quarter, and only tend to pick up again towards the end of the third quarter, heading into Q4, when local market participants start to build stocks for the Chinese New Year celebration in late-January/early February of the following year,” they said. “In India, seasonal strength has similarly tended to occur around Q3, on the back of wedding-and festival-related demand.”

Simona Gambarini, commodity economist at Capital Economics, said that while Chinese imports from Hong Kong have dropped, any fears of a slowdown in global physical demand are overblown.

She said that one of the reasons why gold has lost its luster in China is because of the country’s strong equity markets but investors could move back into gold as “[W]e believe the equity rally is overdone and the risk of a correction is rising.”

Gambarini also remains bullish on gold because any slack in Chinese demand will be taken up by Indian markets.

“[T]he latest data show that India’s imports of gold remained strong in April, further corroborating our view that India will soon return to be the biggest buyer of gold as a result of the relaxation of import duties on the metal in late 2014,” she said in a report. “Overall, in the first four months of the year, India has imported 130 tonnes more than in 2014, compared with an 83 tonnes decline in China’s imports via Hong Kong.”

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By Neils Christensen of Kitco News;
Follow Neils Christensen @neils_C


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