China Overtakes India in Gold Holding as Physical Demand Wanes

by on November 1, 2013 4:44 am GMT

China overtakes India with the world’s largest gold holding. China’s gold reserves jumped a mighty 29 percent to 1,000 tons, according to the World Gold Council. The two countries represent over 50 percent of the world’s demand.

However, physical demand for gold is waning. Mainland buyers purchased 116.3 tons in September compared to 131.4 tons in August. Exports of gold to Hong Kong from China dropped to 6.9 tons from 21.3 tons in August.

Net imports, minus the flows from China into Hong Kong, were 109.4 metric tons versus 110.2 metric tons in August, reported the Hong Kong Census and Statistics Department. “Demand eased a bit in September as investment in China remained sensitive to the gold price outlook,” noted Wang Weimin, an analyst at Dalian Fortune Futures Co. Weimin said that the lower premium paid was a good indicator that Chinese demand slowed.

Gold shipments to China from Hong Kong fell for a second straight month after the premium to take immediate delivery declined. The average premium paid for immediate delivery declined to $8.97 from $13.57 the previous month.

The precious metal fell roughly $40 per troy ounce since the Federal Reserve decided to keep monetary policy the same, and gold dropped on the slightly positive tone in the FOMC minutes citing that monetary easing was working and the economic outlook is getting better.

2013 looks to be gold’s first losing year in over a decade. Gold has declined over 21 percent as institutions sell positions in exchange-traded funds and gold derivatives.