Chinese gold imports are likely to swell further after more than doubling to a record high in March, as retail consumers pounced when prices plunged to a two-year low last month.
China is the world's second-largest buyer after India, and in both countries the steep fall in international gold prices last month unleashed years of pent-up demand for coins and bars.
That will help bolster prices for the metal, which has been abandoned by funds in other parts of the world in the wake of its historic fall.
"Physical demand picked up significantly over the last couple of weeks," said Zhang Bingnan, secretary-general of the China Gold Association. "Consumers and industrial users tend to see price drops as buying opportunities.
"Investment demand should continue to stay strong through the rest of the year because of limited investment alternatives."
Zhang added that both gold sales and processing volumes spiked last month.
Net gold flows from Hong Kong to the mainland jumped to 224 tonnes in March from 97 tonnes in February, smashing a previous record of 114 tonnes in December, official Hong Kong data showed on Tuesday.
Hong Kong sent 557 tonnes of gold to the mainland last year.
In March, Shanghai gold futures fetched premiums of more than US$30 to global prices, making it cheaper to buy the metal overseas.
Imports last month may have swelled further after the drop in international prices spurred frenzied buying in Asia, leading to a shortage of gold bars and coins in Singapore and Hong Kong, which is the mainland's main source for gold imports.
India and China account for more than a third of global demand, according to the World Gold Council. China produced 403 tonnes of gold last year, but consumption was more than double that, at 832 tonnes.
Gold fell to about US$1,321 per ounce on April 16, its lowest in more than two years, after a fall below US$1,500 and fears of central bank sales led to a sell-off that stunned investors and prompted them to slash holdings of exchange-traded funds.
Spot gold traded at about US$1,454 an ounce yesterday afternoon in Hong Kong.
"April imports will be stronger than March," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong. "The world was buying gold and China was no different at all."
A spokesman for Hong Kong jewellery chain Chow Tai Fook, the world's largest jewellery retailer by market value, said traffic at its mainland stores jumped by 50 per cent during the Labour Day holidays.
