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China renews appetite for gold with US$8.5 billion set to arrive as central bank relaxes quotas
- China’s appetite for gold jewellery, bars and coins has recovered as the economy rebounded in recent months
- Around 150 tonnes of gold, worth US$8.5 billion at current prices, are likely to be shipped by next month, multiple sources claim
China has given domestic and international banks permission to import large amounts of gold into the country, according to five sources familiar with the matter, potentially helping to support gold prices after a months-long decline.
With China’s economy rebounding strongly since the second half of last year, its appetite for gold jewellery, bars and coins has also recovered, and since January domestic prices have been higher than global benchmark rates, making it profitable to import bullion.
The People’s Bank of China (PBOC), the nation’s central bank, controls how much gold enters China through a system of quotas given to commercial banks. It usually allows enough metal in to satisfy local demand but sometimes restricts the flow.
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In recent weeks, it has given permission for large amounts of bullion to enter, the sources said.
“We had no quotas for a while. Now we are getting them … the most since 2019,” said a source at one of the banks moving gold into China.
Around 150 tonnes of gold, worth US$8.5 billion at current prices, are likely to be shipped, four sources said. Two of the sources said the bullion would be shipped in April. Two others said it would reach China over April and May.
The bulk of China’s gold imports typically come from Australia, South Africa and Switzerland.
The size of the shipments signals China’s dramatic return to the global bullion market. Since February 2020, the country has on average imported gold worth around US$600 million a month, or roughly 10 tonnes, Chinese customs data shows.
In 2019, its imports ran at about US$3.5 billion a month, or roughly 75 tonnes.
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The People’s Bank of China did not respond to a request for comment.
China’s absence made little difference to gold prices early in the pandemic when Western investors fearful of economic catastrophe stockpiled vast amounts of bullion – traditionally seen as a safe asset – pushing it to a record high of US$2,072.50 an ounce.
India’s demand for bullion has also rebounded from a pandemic-induced slump, with record-breaking imports in March of 160 tonnes of gold, an Indian government source told Reuters this month. China and India typically account for some two fifths of the world’s annual demand for gold. Their recovery is “critical in setting the floor for gold” and should stop prices from falling further over the coming months, said Suki Cooper, an analyst at Standard Chartered.
