Wed, Apr 16, 2014 - Page 15 News List

Chinese gold demand forecast to jump

INVESTMENT OPTION:The World Gold Council says private sector demand from a growing middle class should continue rising, even if China’s economy slows down

AFP, LONDON

China’s annual demand for gold could jump about 20 percent by 2017 as more of its increasingly wealthy population seeks new ways to make money, the World Gold Council (WGC) predicted yesterday.

The council’s forecast comes after China became the world’s largest gold-consuming nation last year, overtaking India.

Annual demand for gold in the form of jewelry, coins and bars is set to hit “at least 1,350 tonnes by 2017,” the council said in a report on China.

That would represent a rise of nearly a fifth from the country’s record consumption of 1,132 tonnes last year.

“The traditional appeal of gold to the Chinese people and consumers’ optimistic outlook for prices should result in private sector demand from all sources climbing to at least 1,350 tonnes by 2017,” the London-based council said.

Gold prices slumped by a nearly a third last year as investors abandoned the perceived safe haven investment in favor of stocks and other riskier bets.

But global demand for gold in jewelry grew to its highest for 16 years as consumers in Asia and the Middle East scrambled to take advantage of the lower prices.

In China, rising demand for the yellow metal has also been driven by the growth of its increasingly wealthy middle class, high levels of savings and restrictions on other investments.

Still, the council warned that a possible slowdown in the world’s second-largest economy as it moves away from rapid export-led growth could dampen gold demand.

“China faces important challenges in moving from an investment and export-led growth model to a more balanced one in which private consumption plays a larger part,” the council said.

“Although the risks associated with this economic transformation should not be underestimated, on balance this process should result in a considerably higher level of consumer spending, which ought to favor the jewelry sector,” it said.

One of the report’s authors, Alistair Hewitt, said that Chinese gold demand had tripled in the decade to last year.

He predicted that the Chinese gold market would continue to develop over the course of the next few years, driven by cultural affinity, the increase in income and government support.

“There is a huge groundswell of people becoming wealthier, that have more money to spend on jewelry and more savings to invest,” he said. “For many people, gold is the preferred form for savings amid volatile stock markets, overvalued property and low interest rates being offered by banks.”

Gold jumped to a two-and-a-half-week peak at US$1,330.59 an ounce on Monday as investors sought shelter from the Ukraine crisis.

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