China’s gold demand expected to surge next decade due to jewellery consumption and investment needs

World’s second largest gold consumer, China’s demand for the precious metal is expected to surge next decade due to jewellery consumption and investment needs, World Gold Council said.

In its Gold Demand Trends report for the third quarter of 2011, WGC said demand for gold bars and coins in China expanded by 24 percent from a year earlier to 60.2 tonnes in the third quarter.

Buying gold as means of investment has become a more common choice for Chinese in the past third quarter as it is viewed as a safe investment during these uncertain economic times, said the WGC in its Gold Demand Trends report for the third quarter of 2011.

However it said China’s per capita consumption of gold jewellery is one of the lowest, at 0.26 grams, when compared with other major gold consuming countries.

If gold were consumed at the same rate per capita as in India, Hong Kong or Saudi Arabia, annual Chinese demand could increase by at least 100 tonnes or as much as 4,000 tonnes in the jewellery sector alone, it said.

China has seen its gold demand grow at an average rate of 13 percent per year over the past five years.

Demand from China’s two largest sectors – jewellery and investment – reached a combined total of 423 tonnes in 2009, with 314 tonnes supplied by domestic mines.

WGC said if China’s central bank boosts gold holdings to 2.2 percent of forex reserves, a peak level seen in 2002, from the current 1.6 percent, country’s total incremental demand would rise by 400 tonnes at the current gold price.

China’s share of global gold demand doubled from 5 percent in 2002 to 11 percent in 2009, and the council predicted that China’s domestic gold mines could be exhausted within six years. - bullionstreet.com

 

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