Benchmark prices in Shanghai have climbed to a premium of more than $43 an ounce to their London equivalent, the highest since 2019, according to data from the World Gold Council. Unusually, the two diverged steadily during the month, with the Chinese market remaining relatively firm despite international price pressure.
The difference shows how much demand in China exceeds supply, which is constrained by government policy. Only accredited banks in the country are allowed to import gold, with quantities set by the People’s Bank of China.
Banks are likely to receive new import quotas after the October holidays, a source said. Local importers have recently struggled to get shipments approved by Chinese lenders, people familiar with the matter say, in a sign they may have exhausted their existing quotas.
Although China’s gold imports in August hit a four-year high, there has still been a shortfall since the start of the pandemic, when overseas purchases collapsed. Imports faltered again this spring as jewelry demand was hit after the Shanghai financial hub was shut down to control the virus.
As much of the country continues to be impacted by the virus fight and sporadic shutdowns, jewelry demand is improving, especially ahead of the week-long national holiday early next month, according to the consulting firm Metals Focus. This, in turn, could help support international prices, which are under pressure due to rising interest rates around the world. “As the world’s largest physical market, China’s local demand may provide some support,” analysts at the company wrote in a note. “Retailers have started stocking up for the upcoming national holiday.”