China, the world's biggest gold market, may boost imports through Hong Kong by about half this year as local investors seek to protect their wealth from currency risks, a slowing property market and volatile stocks, according to the Chinese Gold and Silver Exchange Society.
Mainland China is set to import about 1 million kg from the territory this year, said Mr Haywood Cheung, president of the century-old exchange in Hong Kong, which trades physical gold and silver.
That compares with net purchases of 647,000kg last year, and would be the biggest since 2013, data from the Hong Kong Census and Statistics Department compiled by Bloomberg shows.
Demand is rising on concerns over property, share and bond markets and the outlook for the yuan, amid a government drive to reduce leverage in the financial system.
Local consumption was up 15 per cent in the first quarter, with sales of bars for investment climbing more than 60 per cent and dwarfing a 1.4 per cent rise in jewellery buying, according to data from the China Gold Association. China also imports gold from Switzerland.
"People are looking at other means to invest, a safe haven to protect their yuan because of the depreciation, so everybody starts to look for safe-haven products," Mr Cheung said. In December, China imported 158,000kg from the country, taking the total for the year to 442,000kg , up from 288,000kg in 2015, the data shows.
Global investors have also increased holdings. Assets in the SPDR Gold Trust, the world's largest exchange-traded fund backed by bullion, have climbed by more than 6 per cent since the end of January to 851,000kg as of Monday. Bullion rose as much as 1.1 per cent to US$1,293.78 an ounce yesterday, the highest level in about seven weeks, and traded at US$1,292.10 by 1.50pm in London.
The Chinese Gold and Silver Exchange Society is planning to build a bonded warehouse in Qianhai with a storage capacity of 1.5 million kg of gold, and completion is expected in two years to three years, said Mr Cheung. A temporary warehouse, which holds about 50,000kg to 100,000kg of gold will be operational by the end of this year, he added.
He also said the Shenzhen region supports some 3,000 jewellery manufacturing firms, which supply 70 per cent of the Chinese retail market.
Mr Philip Klapwijk, managing director of Precious Metals Insights, said that while the case for investment demand in China is reasonably "solid", jewellery demand will probably decline again this year, in terms of volume, as the consumer spends money on other things such as property or travel.