Asia Gold-China buying picks up to dodge year-end supply crunch
Gold premiums in Hong Kong rose to their highest in about five months on Tuesday as Chinese banks stocked up on bullion to avoid a supply crunch when refineries close shop for the year-end holidays.
Gold bar premiums in Hong Kong rose to as high as $1.50 an ounce above London prices, compared to 50 cents to $1 over the past few weeks, dealers said.
"Chinese buying has been picking up," said Dick Poon, general manager of Heraeus Metals Hong Kong Limited. "The banks want to keep some inventory and prepare for the holiday demand around the Lunar New Year."
Refineries typically close around Christmas and New Year, creating a supply shortage which could lead to a spike in premiums, dealers said.
"There probably won't be much supply around until mid-January," said Ronald Leung, a dealer at Lee Cheong Gold Dealers in Hong Kong.
The premium in Shanghai gold prices over London also widened, indicating rising demand in the Chinese market. Spot gold traded on the Shanghai Gold Exchange traded at 343.85 yuan a gram, or $1,716 an ounce, at a premium of about $8 over spot gold.
Demand for retail gold usually rises ahead of the Lunar New Year holiday in China, which falls in mid-February this year.
The pickup in Chinese buying follows data from Hong Kong which showed last week that net gold flows from the former British colony into China in October hit their lowest level since June 2011 due to high prices and weak interest.
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