China Stocked up on Swiss Gold as Turbulent Year Came to a Close
China’s gold imports from Switzerland soared at the end of last year when Beijing was struggling to defend the yuan, and incoming US President Donald Trump was casting doubts about Sino-US economic ties.
The Swiss Federal Customs Administration said in January that its gold bullion exports to China rose to 158 tonnes in December from 30.6 tonnes in November.
Switzerland owns some major gold refineries, with India and China its top export destinations. The Swiss customs data did not reveal details about the buyers in China. However, rising demand ahead of the Lunar New Year and a possible purchase by the central bank—to diversify foreign reserves and counter any adverse effect from Trump’s remarks—could explain the surge.
Meanwhile, China’s gold consumption dropped 6.7% to 975.4 tonnes from the previous year, though it still remains the world’s top gold consumer and largest producer.
The yuan’s depreciation in 2016, the bear market in China, and external shocks such as the Brexit and Trump’s victory have all contributed to the steady demand for gold as a safe-haven asset.
PBOC data showed gold reserves staying unchanged for the last three months of last year, at 1,678 tonnes. However, World Gold Council data pegged China’s official gold holdings at 1,843 tonnes at the end of 2016, with the value of the gold accounting for 2.2% of China’s Forex reserves.
Gold prices are sensitive to geopolitical turmoil and the monetary policies of major economies. Trump’s plan to build a wall on the border with Mexico and his ban on Muslim immigration triggered protests in the US and led to a drop in global markets and the dollar. The risks of a US trade war with China will add more uncertainty to financial markets.