Chinese Govt Tightens Control on Gold to Curb Imports, Could Drop 400T from 2013 – Report

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By Esther Tanquintic-Misa | July 4, 2014 2:24 PM EST

Regulatory controls laid down by the Chinese government on gold financial deals will mostly curb the country's imports of the yellow metal, a consultant told Reuters on Thursday.

REUTERS/Rick Wilking
Senior refinery technician Vincente Sandoval puts a gold "button" into a furnace to be further refined to form gold dore bars at Newmont Mining's Carlin gold mine operation near Elko, Nevada May 21, 2014. The dore bars contain approximately 90 percent gold, 8 percent silver and 2 percent trace material. Picture taken May 21. REUTERS/Rick Wilking (UNITED STATES - Tags: BUSINESS COMMODITIES)

Philip Klapwijk, director of the Hong Kong-based Precious Metals Insights, said the government's crackdown on commodity financing will hit import demand for the safe haven precious metal to drop 400 tonnes from 2013.

"(Gold imports) will probably decline for the full year given the impact of firstly, weaker real demand in China compared to its outstanding level in 2013 and secondly, measures to restrict the abuse of gold lending and other financial plays using the yellow metal," he told said at the Reuters Global Gold Forum.

He said China's total gold imports reached nearly 1,800 tonnes in 2013. "That figure will surely be several hundred tonnes lower in 2014.... It is another headwind for any rally in gold this year, and it also means the price floor may be a bit shakier."

He noted China's gold imports in May from Hong Kong had already dropped to the lowest level since January 2013. No details were provided.

In a report released early this year by the World Gold Council, the body noted that gold coming into China was used to "raise low-cost funds for business investment and speculation."

An estimated 1,000 tonnes of gold worth $42 billion at prevailing prices could be tied up in those transactions, the WGC said.

This mean that "China has a very large 'surplus' of gold -- cumulatively over 2,000 tonnes in the last 4 years -- that can mostly only be explained by either private sector financial use of gold or official purchases," Klapwijk told the Reuters Forum. "It is impossible to be sure of the split between these two main semi-hidden sources of demand, but both would be large, in my view."

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(Photo: REUTERS/Rick Wilking / )
Senior refinery technician Vincente Sandoval puts a gold "button" into a furnace to be further refined to form gold dore bars at Newmont Mining's Carlin gold mine operation near Elko, Nevada May 21, 2014. The dore bars contain approximately 90 percent gold, 8 percent silver and 2 percent trace material. Picture taken May 21. REUTERS/Rick Wilking (UNITED STATES - Tags: BUSINESS COMMODITIES)
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