(Bloomberg) -- Gold in China dropped the most in three years after Beijing permitted more imports, all but closing the gap with international prices that’s persisted for weeks.

The precious metal fell 3.8% on the Shanghai Gold Exchange, with losses accelerating toward the end of the trading day. It follows a months-long rally in local prices, which created a record premium to gold outside of the country.

Shanghai prices were about $10 an ounce above international prices at the close, according to calculations by Bloomberg. This month, premiums had risen to a record of over $120 an ounce.

A fresh round of quotas to import gold was recently issued by the authorities, easing tightness in the local market, according to traders familiar with the matter. The plunge is also “likely to reflect low levels of liquidity ahead of major holidays in China starting this weekend,” said Nicholas Frappell, global head of institutional markets at ABC Refinery in Sydney.

The unprecedented gap between local and international prices was driven by robust demand combining with constrained supply. The People’s Bank of China imposed imports curbs over the summer at a time when local bullion buying was boosted by the country’s economic malaise.

China’s central bank didn’t immediately respond to a fax outside of working hours.

The constraints on gold shipments — which reduce the need for local banks to buy dollars — is one of several measures Beijing had taken to defend the yuan. The currency has come under pressure from tighter monetary policy elsewhere in the world.

Internationally, spot gold was steady at $1,874.98 an ounce as of 11:31 a.m. in London. The Bloomberg Dollar Spot Index declined 0.2%. Silver, platinum and palladium all edged higher.

--With assistance from Alfred Cang and Josh Zhang.

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