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May 21, 2014

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Home » Business » Energy

China gold demand falls 17% in 1st quarter

By Hu Xiaocen | May 21, 2014, Wednesday | Print Edition

CHINA’S gold demand in the first quarter retreated as investment in bullion bars and coins slumped and gold bugs took a wait-and-see attitude, the World Gold Council said yesterday.

Demand in the world’s biggest gold market decreased 17 percent from a year ago to 278.1 tons, the London-based industry association said in a report.

“Chinese investors have been waiting on the sidelines because the market hasn’t shown a clear direction,” Albert Cheng, the council’s managing director for the Far East, told Shanghai Daily in a telephone interview.

However, demand for gold jewelry in the first three months rose 9 percent to a record 215.6 tons, while bar and coin investment slumped 55 percent to 62.5 tons.

China overtook India as the world’s biggest gold market last year by posting a record-high demand of 1,132 tons. The Indian government raised its import tax on gold last year to stem US dollar outflows.

“China and India are the twin engines that drive the global gold market,” said Cheng. “The difference between demands in the two markets has become marginal.”

He added: “We’ve seen some positive changes in India. The Bharatiya Janata Party, which is very pro-gold and pro-business, has just scored a major victory in national elections. India’s demand is likely to pick up. So we will see more balanced growth globally this year.”

China’s demand is expected to expand 20-25 percent during the next four years, according to Cheng.

Xinhua news agency reported the People’s Bank of China has preliminarily approved an international trading board for the Shanghai Gold Exchange in the city’s pilot free trade zone.

Although Shanghai has the largest exchange in the world for physical gold trading, it still lags New York and London in volume of trading and diversity of product.

“It’s a milestone in the opening up of China’s gold market,” said Cheng. “It will be a new avenue for domestic players to trade with overseas players. As the internationalization of the Chinese yuan speeds up, Shanghai will become one of the top-three gold markets after New York and London.”

Globally, gold demand in the first quarter was little changed at 1,074 tons, with a rise in jewelry sales offsetting a drop in demand for bars and coins.

Prices recovered some of the steep losses of 2013, rising about 7 percent in the first three months and now hovering just below US$1,300 an ounce.

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