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China has awarded licenses to import gold to two foreign banks for the first time, according to sources, as moves to open the biggest physical bullion market in the world gains momentum.
The move to allow more banks to import gold would increase the supply in the country thereby decreasing local prices which are higher than in other countries in Asia. Premiums in China have a tendency to be higher as supply is less than in other parts of Asia because of the quota system in place and the small number of import licenses.
China was confronted with a problem with supply of gold in the early part of 2013 when gold prices decreased sharply resulting in a great demand that ate up gold inventories of banks and jewelry sellers. Reliable sources with direct knowledge on the matter told Reuters that ANZ and HSBC were granted import licenses last year.
According to other trading sources, China's Everbright Bank has also been given the approval to import gold like the nine other local banks that had been previously granted approval.
Both ANZ and HSBC refrained to comment on the matter. Everbright on the other hand could not be immediately reached for comments.
China is increasing its transparency according to Cameron Alexander, manager of Asian precious metals demand of GFMS, a metals consultancy owned by Thomas Reuters. Alexander also expressed the possibility of other banks being given further access too.
Traders warned that the granting of new licenses does not guarantee that imports would sharply increase from 2013 volumes, since it is the level of demand that would be the key factor in determining and driving shipments. They added that the move however indicates that the demand for gold would likely be strong.
