China Allows Banks to Import more Gold as India Is Suffering from the Lockdown

Reuters reports that Chinese financial authorities have given national and international banks permission to import even more gold. This news can provide much-needed support to the market.

It’s worth reminding that China is the world’s largest gold consumer: hundreds of tons of the yellow metal worth billions of dollars are sold on the internal market annually. Last year, however, the consumption of gold fell due to the impact of the Covid-19 restrictions.

Chinese economy began to recover in late 2020, and that led to an increase in the demand for jewelry, as well as gold coins and bullion. Internal gold prices grew, and importing gold became profitable once again.

Now that the financial authorities have issued an official permission to bring more gold into the country, analysts expect that Chinese gold imports will grow by 150 tons, or $8.5 billion, as reported by Reuters. According to some predictions, the gold in question should be delivered to China in May.

China imports most of its gold from Australia, South Africa, and Switzerland, and all imports are controlled by the People’s Bank, which issues quotas to commercial banks.

These optimistic developments are in stark contrast with what is happening in India. The second pandemic wave and the resulting lockdown have virtually paralyzed gold jewelry production, Arabian Business writes.

The slump in the manufacturing of jewelry will have a strong negative impact on Indian jewelry exports, especially towards UAE, which is India’s main buyer in this segment.

As explained by a representative of the Indian Bullion and Jewellers Association (IBJA), most of the country’s jewelry manufacture is concentrated in the states of Maharashtra and Gujarati, those hardest hit by the second wave. Due to the restrictions, their workers had to return to their home states, and the sudden lack of labor forced the production to stop.

The Indian gold and jewelry market experienced severe losses in 2020 when the government introduced one of the world’s strictest lockdowns. Since then, jewelry exports have recovered somewhat, but the new Covid-19 wave is undoing the recent gains.

According to some data, the UAE is the largest market for Indian gold jewelry, accounting for 75% of the exports. At the same time, the UAE is also the second-largest supplier of gold to India after Switzerland, as shown by the Swiss Customs’ monthly reports.

It wasn’t just Indian jewelry exports that suffered in April 2021. Most of the sea port and airport facilities drastically reduced their operations because of an outflow of workers, which, in turn, paralyzed gold imports into the country.