Chinese imports not all they seem
Interesting bit of market intelligence from GFMS:
Reviewing the available customs data reveals bullion flows from Hong Kong to mainland China posted a massive increase this year, with total volumes in the first five months rising over 700% year-on-year. On first glance, this may suggest that demand in China has continued to strengthen with these imports destined for fabricators producing jewellery and investment products. However, our information collection from various trade sources indicated that these Hong Kong export numbers have been highly inflated by growing round tripping between mainland China and Hong Kong whereby local companies used gold to engage in currency and interest rate arbitrage transactions.
I can't get any further details on this from our contacts, nobody wants to talk about it, which is a pretty good indication GFMS is on to something here. Will be interesting to watch China-HK volumes in the coming months, these arbitrages usually don't last.
Reviewing the available customs data reveals bullion flows from Hong Kong to mainland China posted a massive increase this year, with total volumes in the first five months rising over 700% year-on-year. On first glance, this may suggest that demand in China has continued to strengthen with these imports destined for fabricators producing jewellery and investment products. However, our information collection from various trade sources indicated that these Hong Kong export numbers have been highly inflated by growing round tripping between mainland China and Hong Kong whereby local companies used gold to engage in currency and interest rate arbitrage transactions.
I can't get any further details on this from our contacts, nobody wants to talk about it, which is a pretty good indication GFMS is on to something here. Will be interesting to watch China-HK volumes in the coming months, these arbitrages usually don't last.
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