Imports of gold surge as buyers seek hedge

SINGAPORE / BEIJING - The Chinese mainland's gold imports from Hong Kong surged to a record in November as consumers bought the metal before the Lunar New Year this month and investors sought to hedge against turmoil in financial markets.

The mainland bought 102,779 kg from Hong Kong in November, up from 86,299 kg in October, according to the Census and Statistics Department of the Hong Kong government.

Gold demand is climbing on the mainland as rising incomes and concerns about inflation bolster purchases. China overtook India in the third quarter as the largest gold jewelry market, according to the World Gold Council. The nation is also the world's biggest producer.

"China's appetite for gold is very strong and growing," said Tao Jinfeng, chief investment consultant at Haitong Futures Co, China's largest brokerage by registered capital.

"The few months before the Lunar New Year are typically the peak demand period for Chinese people."

Imports were profitable as prices in Hong Kong mostly traded at a discount to those in the mainland in November, according to Bloomberg calculations.

Gold for immediate delivery of 99.99 percent purity on the Shanghai Gold Exchange was at 334.35 yuan ($52.95) a gram on Wednesday, compared with HK$408.20 ($52.67) at the Chinese Gold & Silver Exchange Society.

"There is always the possibility that some purchases were made by the central bank," said Tao, rated the fourth-best China gold analyst in a Futures Daily and Securities Times poll.

The People's Bank of China last disclosed its gold reserves more than two years ago, announcing that it held 33.89 million ounces, or 1,054 tons, as of June 30, 2009.

That was the world's fifth-largest holding by country, according to World Gold Council data. Central banks and government institutions bought 142 tons in 2010, International Monetary Fund data show.

Gold climbed 10 percent last year, rallying for an 11th year, as central banks joined investors in buying bullion to diversify assets. South Korea, Thailand, Turkey and Russia were among the countries that added gold to reserves in 2011.

Bloomberg News