SINGAPORE Oct 29 Chinese gold prices closed
lower than global prices on Tuesday for the first time this
year, traders said, as fears of a credit tightening prompted
investors to sell bullion for cash.
Prices on the Shanghai Gold Exchange closed
about $2 an ounce lower than international spot prices,
compared with April-May premiums as high as $30.
The last time Chinese prices traded at a discount to
international prices was just before Christmas last year,
according to traders.
"The rise in borrowing costs in onshore China plays a
crucial role. People don't want to keep the metal and they try
to dump it to raise cash," said one precious metals trader in
Another trader said there had not been a significant drop in
demand but liquidation of stocks was taking its toll on prices.
"It really is driven by money markets."
On Monday, money market rates in China reached their highest
levels since June's dramatic cash crunch as some market players
believed that regulators had signalled they might clamp down on
excessive liquidity to get property prices and inflation under
However, on Tuesday money rates stabilised after the central
bank resumed open market operations for the first time since
Oct. 15, easing worries that the authorities were preparing to
dramatically tighten monetary policy.
The traders said premiums could come back up if global
China has been a big buyer of gold this year, when the metal
has lost about 20 percent of its value, and is set to overtake
India as the biggest gold consumer in 2013.
China, where gold is a popular form of investment, does not
release gold trade data but numbers from Hong Kong suggest that
consumption is near record levels.
Macquarie Research said in a note on Tuesday that China
bought 116 tonnes of gold from Hong Kong in September, only
slightly lower than the 131 tonnes in August.
Though the imports from Hong Kong have fallen
month-on-month, they have stayed above 100 tonnes for five
straight months, indicating that demand is only cooling off from
peak levels seen earlier this year and not dropping
Demand in most other parts of Asia has been subdued, with
premiums remaining stable from last week. However, Indian
premiums are near record highs of $130 an ounce due to a
shortage of supply.
(Reporting by A. Ananthalakshmi; Editing by Alan Raybould)