China's Gold Prices Rising Higher Than Rest of World Due to Import Curbs

SEATTLE (Scrap Monster): China’s gold price is rising against levels in London, a trend that local traders say is due to government curbs on imports of the precious metal.

The Shanghai spot price was more than $40 an ounce higher than that in London on Aug. 14, according to Bloomberg calculations based on exchange data. That’s the biggest premium in more than five months, with the gap steadily widening from late June even as consumer demand in China remained sluggish.

Authorities moving to limit gold imports appears to be a major driver behind the growing gap, according to traders and importers.

The government has reduced or stopped issuing import quotas to some local banks, according to people familiar with the matter, who asked not to be identified as the information is private. That’s resulted in a drop in flows over the last few months, two of the people said, and there’s no immediate prospect of the affected quotas being issued again. The reason for the curbs isn’t clear.

China vies with India as the world’s biggest buyer of gold, so demand and supply trends there can influence global prices for the metal. Chinese demand has struggled to regain momentum as the country’s economic jitters turn consumers off gold jewelry or investments in the metal, with purchases in those categories still below long-term averages. As recently as June, prices in Shanghai were at a discount to the international market.

Courtesy: www.finance.yahoo.com