SINGAPORE: China's gold purchases via main conduit Hong Kong fell to a four-month low in March as a weaker yuan and domestic prices below the global benchmark kept banks from importing.
Lower imports from the world's top consumer of the metal, which has been a stabilising factor as gold prices fell over the past year, could add pressure on bullion as demand from the second biggest buyer India has also taken a hit from tighter import rules.
Net gold flows into China from Hong Kong fell to 85.128 tonnes from 112.314 tonnes in February, according to data emailed to Reuters by the Hong Kong Census and Statistics Department.
China had imported a record 136.185 tonnes in March 2013.
Total gold imports from Hong Kong - including those that are shipped back - slipped to 105.855 tonnes last month from 125.004 tonnes in February.
"The yuan is the most important factor," said a trader at a gold-importing bank in Shanghai. "Banks are not able to cover the cost of imports, so they are buying less." "Physical demand has also fallen after the Chinese New Year holiday," he said.
Banks and retailers had loaded up on the precious metal ahead of the Lunar New Year holiday celebrated on Jan. 31, when gold is often given as a gift. Prices on the Shanghai Gold Exchange, the platform for all physical gold trades in China, flipped to a discount to spot prices in early March and remained lower than London prices for all of that month.
In the last few days, they have been trading either on par or at a very slight premium.
Banks are reluctant to bring more gold into the country at a time when demand is soft and a weak yuan would force them to take losses on any sales, banking sources told Reuters earlier this month.
A few importing banks are also sitting on some stock that they had imported when the yuan was stronger and which they are now holding on to due to the cheaper domestic rates, the sources said.
The yuan hit a 16-month low last week.
Last year, China imported a record 1,158.162 tonnes from Hong Kong, compared with 557.478 tonnes in 2012, overtaking India to become the world's biggest gold buyer.
Chinese consumer purchases of jewellery, bars and coin jumped sharply to record highs last year as gold prices fell 28 percent after a 12-year bull run.
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