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China may have 1,000 tonnes of gold tied in financing: report

Published on Apr 15, 2014 12:16 PM

SINGAPORE (Reuters) - Chinese firms could have locked up as much as 1,000 tonnes of gold in financing deals, an industry report said, indicating a big a slice of imports has been used to raise funds due to tight credit conditions, rather than to meet consumer demand.

The financing-related buying in the world's biggest bullion consumer means gold prices could come under pressure if imports are hit by a broader government crackdown on using commodities to raise finance.

Gold has been increasingly reliant on China for support due to outflows from exchange-traded funds and as the United States Federal Reserve unwinds its stimulus.

"Imported gold is being used via gold loans and letters of credit (LC) to raise low cost funds for business investment and speculation," according to a report by the World Gold Council (WGC) released on Tuesday.

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