Dont look for Chinas ravenous appetite for gold to subside anytime soon. Just about a week after the Shanghai Gold Exchange launched the first-ever yuan-denominated gold price fix, news continues to surface that confirms Chinas long-term obsession with the yellow metal.
For starters, the key mainstream metric of Chinas gold demand monthly bullion imports from Hong Kong posted another gain for March. The mainlands net purchases rose to 64.1 metric tons, from almost 43 tons a month earlier, Bloomberg reported.
Retail demand remains strong; Chinas central bank keeps buying on a monthly basis; activity on the Shanghai Gold Exchange, which is often cited as the most accurate measure of nationwide wholesale demand, increased to 183 tons in March from 107.6 tons in February; and imports from Switzerland (which incidentally is acquiring massive amounts of bullion from a bankrupt Venezuela) climbed from 27.2 tons to 29.5 tons.
VTB Bank to supply long-term: Top Chinese ally Russia, which is expanding its gold reserves at an even faster pace than China (adding 430,00 ounces in March), also is supplying Beijing with metal. VTB Bank, its second-largest lender, has announced that it will be shipping between 80 to 100 tons of bullion to China per year. The RT network is even suggesting that Moscow and Shanghai are working together to dominate the global gold trade.
We believe that the Chinese market opens up long-term opportunities for Russian business and VTB will contribute as much as possible to developing and facilitating trade relations between our countries, said VTBs chairman, Yuri Soloviev.
Buying spree by Chinas miners: And thats not all China is doing to increase its gold footprint. Chinas gold miners plan to extend the biggest buying spree in four years as the nation seeks greater clout in the global bullion industry, a separate Bloomberg analysis reported. The prospect may be helping drive up the price of assets from Australia to the U.S.
Overseas mine purchases by Chinas top producers quadrupled from 2014 to $483 million in 2015, the news agency noted, as they target assets they deem cheap. That binge looks likely to continue.
Chinese mining companies domestic development is limited by domestic resources, and the future, the hope lies overseas, Zijin Mining Chairman Chen Jinghe said. Thats an astounding statement considering that China already is the worlds largest miner of gold.
Expanding Asian gold hub: But the biggest news this week for the Chinese gold industry is confirmation that the Hong Kong Gold and Silver Exchange Society is proceeding with plans to build what may end up being the biggest gold vault in the world, Zero Hedge noted.
The Hong Kong exchange is joining forces with arguably the worlds largest bank, the Industrial and Commercial Bank of China (ICBC), to launch gold trading services in the Qianhai free trade zone in September, providing custodial and physical settlement service targeted at commercial users and precious metals traders, The South China Morning Post reported.
Although a temporary gold vault will be used, bigger plans are in the making. The exchange plans to build a HK$1 billion permanent gold vault facility, including a bonded warehouse, trading floor and related offices areas in Qianhai. The construction project will take two years.
The partnership has the potential to connect Hong Kong, Macau, Qianhai and Shenzhen as a gold trading hub, the Hong Kong exchange chief added.
The development of the gold industry will speed up the physical delivery process of gold trading in Hong Kong, Shanghai and Qianhai.
Its clear that China is firing on all cylinders when it comes to gold: mining, consuming, acquiring, storing, and working to controls the pricing mechanisms. As the rest of the (developed) world is increasingly exiting the gold trading, bonding, custody and vaulting business, the interest in China, already the worlds largest importer of gold, has never been higher, Zero Hedge concluded.