The gold price spread between the London paper markets and the Shanghai physical markets continues to climb as the divergence between China's PM fix and London's AM fix reached $36 on Dec. 13.
Yet these prices are not truly indicative of what is really going on in the physical markets since the bullion banks crushed down the spot price following the election of Donald Trump back on Nov. 8. This is because geo-political and economic events in both India and China have caused demand to surge immensely over the past month, and dealers and jewelers in both countries are incorporating premiums sometimes as high as 50% over the designated price.
Last week saw news of reported gold import curbs in China (and looming capital controls) has sent gold premiums in China near three-year highs amid limited supply of the precious metal (as Reuters reports)...
The import curbs may be part of China's efforts to limit outflows of the yuan after the currency's slide to its weakest in more than eight years, traders say. China allows only 15 banks to import gold, including three foreign lenders.
"There is severe restriction on the banks' quota to import gold into China. Each one of them have to justify their need," a Hong Kong-based banker said.
Gold was sold in China at about $24 an ounce above the international spot benchmark this week. Premiums went as high as $30 last week, the most since January 2014, according to Thomson Reuters data. - Zerohedge
In November the country's gold imports jumped to around 100 tonnes, the highest in 11 months.
Jewellers and bullion dealers are deferring purchases and gold imports in December could fall to 30 tonnes, down from 107 tones in the same month a year ago, said a Mumbai-based dealer.
It is estimated that one-third of India's annual demand of around 800 tonnes is paid for in "black money" - the local term for untaxed funds held in cash by citizens that do not appear in any official accounts.
And this has sparked a surge in physical demand (amid limited supply concerns)... (as Reuters reports)
There have also been reports of people rushing to buy gold by paying as much as a 50 percent premium above official prices using their unaccounted money to skirt the note ban.