As India continues its anti-gold stance (and does nothing but drive the undergound smuggling business), China is continuing its opening of the world's biggest physical bullion market. As India's Economic Times reports [8], China has granted licenses to import gold to two foreign banks for the first time. "China is actually increasing its transparency," noted on analyst, allowing more banks to import gold could increase the supply of the metal into the country, easing local prices that are higher than in most Asian nations (premiums are currently about $15 an ounce over London prices, compared to less than $2 in Singapore and Hong Kong). They rose to a record high of $30 in April-May last year. "This is the first step that the regulators are taking to ensure that its [physical] gold futures contract in the free-trade zone can take off."
China has granted licences to import gold to two foreign banks for the first time, sources said, as moves to open the world's biggest physical bullion market gather pace.
Allowing more banks to import gold could increase the supply of the metal into the country, easing local prices that are higher than in most Asian nations.
China's gold imports more than doubled last year to over 1,000 tonnes - ousting India as the biggest buyer - as demand soared to unprecedented levels due to the first drop in international prices in 12 years
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"China is actually increasing its transparency. I think there will possibly be further access to other banks as well," said Cameron Alexander, manager of Asian precious metals demand at metals consultancy GFMS, which is owned by Thomson Reuters.
China faced a supply crunch early in 2013 when a sharp plunge in gold prices released pent up demand that eroded inventories at banks and jewellery sellers.
Premiums in China tend to be higher as supply is tighter than other parts of Asia due to the quota system and the limited number of import licences.
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The granting of new licences is the latest in a string of steps by China to ease restrictions on bullion trading and boost market accessibility.
China approved its first gold-backed exchange-traded funds last year and extended trading hours on the futures exchange.
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The move also comes as the SGE plans to launch gold futures in the city's pilot free trade zone this year that would be open to foreign investors.
"China will need to allow more foreign players into the physical gold market if it's planning to have foreign investors participate on its gold futures," said one of the sources.
"This is the first step that the regulators are taking to ensure that its gold futures contract in the free-trade zone can take off."