From Reuters:
Estimates imply strong imports driven by trade financing deals
* Imported gold used via loans, LCs to raise low cost fundsSo much for all those physical demand stories coming out of Shanghai.
* Total China demand to grow 25 pct over four years (Adds comments from Chinese banks, analysts)
SINGAPORE, April 15 (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 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 top gold consumer means prices could come under pressure if imports are hit by a broader crackdown on using commodities for finance.
The report - issued by the World Gold Council (WGC) on Tuesday - and other sources in China said gold was not as widely used for raising money as copper, which saw prices drop to a 3-1/2 year low in March on fears that those deals would unravel.
"Imported gold is being used via gold loans and letters of credit (LC) to raise low cost funds for business investment and speculation," the report said.
"The use of gold for purely financial operations is a form of demand that represents a small part of the much wider growth in shadow banking. It is feasible that by the end of 2013 this could have reached a cumulative 1,000 tonnes."
That accounts for almost a third of annual global production and is worth about $43 billion at current prices....MORE
And with gold down $33.40/ounce (you can do the yuan/gramme conversion yourself) the collateral for the gold loans is off about 2.5% this morning.
We are looking for $875 or thereabouts some time in Q3 of this year.
