CHINA'S GOLD IMPORTS SHOW SHARP PICKUP

January 11, 2012

Gold imports from Hong Kong increased to record levels ahead of the Chinese Lunar New Year. These imports, along with a higher euro, boosted gold prices near one-month highs. The precious metal traded at $1638.30 per ounce at 6:21 a.m. Pacific Time on the New York Spot Market, with silver at $29.84 per ounce.

Mainland China bought 102.5 tons of gold from Hong Kong during the month, an increase of almost 25% from October. The new data continues a trend of increasing demand that has seen gold purchasing in China more than triple during the first 11 months of the year.

"China's appetite for gold is very strong and growing," said Tao Jinfeng, chief investment consultant at Haitong Futures Co., China's largest brokerage by registered capital. "The few months before the Lunar New Year is typically the peak demand period for Chinese people."  The week-long New Year holiday starts Jan. 23.

"There is always the possibility that some purchases were made by the central bank," said Tao. China does not publish its gold trade data and last shared data on its sizeable gold reserves at 1,054 tons in mid-2009. China's reserve holdings are the world's fifth-largest, according to the World Gold Council.

Aggressive monetary easing in the year ahead from the world's key central banks could keep sentiment for gold and silver bullish, Societe Generale wrote in a research note. In the long term, gold will continue "to benefit from fund buying as speculative players rebuild their positions," said James Moore, an analyst at TheBullionDesk.com.

(Sources:  "PRECIOUS-Gold toys with one-month highs as demand blooms," Reuters, January 11, 2012; "China's Gold Imports From Hong Kong Climb to Record on Investment Demand," Bloomberg, January 11, 2012; "Gold futures rise on record Chinese gold imports," MarketWatch, January 11, 2012)

†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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