China's net gold imports via Hong Kong fell for the second month in a row in October, according to a report published on Monday by Reuters. This is due to the uneven economic recovery affecting demand. In October, imports fell by 23% to 26,793 metric tons, compared to September's 34,757 tons.

The People's Bank of China controls the amount of gold entering the country through quotas set for commercial banks in the country. The ongoing economic instability is likely to keep consumers from significant discretionary spending, potentially dampening the demand for gold.

It is probable that the data from Hong Kong does not fully reflect the complete picture of Chinese purchases, as gold is also imported through Shanghai and Beijing. In October, consumer prices in China decreased, with indicators of domestic demand weakness not seen since the pandemic. Meanwhile, the country's factory price index leaned further towards deflation, worsening the prospects for overall economic recovery.

The profits of Chinese industrial companies continued to grow for the third consecutive month in October, albeit at a slower pace, suggesting that additional policy support from Beijing may be needed to sustain growth.

According to the data, there was also a decrease in gold shipments from Switzerland to China last week, despite Swiss gold exports to India increasing by 60% compared to the previous year.

Last month, Chinese dealers were selling gold at a profit ranging from $25 to $60 per ounce compared to global spot prices, with a record-high profit of around $135 observed in September.

Economists believe that the demand for gold is likely to remain subdued due to high prices until there is a replenishment of stocks ahead of the Chinese New Year.