(Reuters) – China’s net gold imports via Hong Kong in May fell below its exports for a second straight month, but were still 85% higher than April, as domestic supply remained abundant in the top consumer amid a bleak demand outlook, data showed on Monday.

Net gold imports via Hong Kong stood at minus 1.5 tonnes from the minus 10.3 tonnes in April, which was the first time imports fell short of exports since at least 2011, Hong Kong Census and Statistics Department data showed.

Total gold imports via Hong Kong dropped 44.7% to 2.3 tonnes from 4.2 tonnes in April.

“While China’s demand did improve in May due to the Labor Day holiday, supply was still abundant within the country, as local prices were still mostly trading at a discount to the global benchmark,” said Samson Li, a Hong Kong-based precious metals analyst at Refinitiv GFMS.

“The discounts retreated in May, suggesting the oversupply corrected somewhat. But, sellers were not keen to re-stock inventories, suggesting they were not optimistic about spending sentiment and preferred holding cash.”

In May, gold was sold at a discount of about $29 an ounce on average versus global benchmark spot prices, a reduction from the $36.25 average discounts in April. [GOL/ASIA]

Lockdowns imposed to curb the coronavirus outbreak have hammered physical gold demand, especially in major consumers China and India.

“Weak physical demand is the heart of the issue … There is more of a tendency to sell gold physical right now on the retail side,” said Stephen Innes, chief market strategist at financial services firm AxiCorp.

China has been steadily reducing its reliance on Hong Kong as a conduit for gold over the years, turning to direct imports gold via Shanghai and Beijing. But analysts said the recent declines were more a factor of low demand amid the pandemic and ample domestic stocks.

(Reporting by Eileen Soreng in Bengaluru; Editing by Toby Chopra and David Evans)