Chinese Demand for Gold Surges

Chinese demand for gold is surging and the annual demand in 2011 hit 761.05 tonnes (t). This amount is up 33.2 percent over the previous year according to recent data released by the China Gold Association.

From gold jewelry to gold bars， Chinese demand for gold saw a boom in various fields in 2011. Among them， the consumption of gold jewelry amounted to 456.66t， a 27.9 percent increase over 2010. The consumption of gold bars increased to 213.85t， up 50.7 percent year on year and the consumption of gold coins hit 20.80t， up 25.2 year on year. The consumption of gold used in industry reached 53.22t， a 12.3 percent increase year on year.

The growth is a result of increases in both jewelry and investment. The largest rise was in investment， where demand leaped by 69% to 258.9t with a value of RMB 84.5 billion， according to the World Gold Council. China jewelry demand increased every quarter of last year and was the largest single jewelry market worldwide for the second half of 2011.

Growth in demand for gold is also a global trend. Global demand for gold in 2011 rose to 4，067.1t， worth an estimated US$205.5 billion. This marks the first time that global demand has exceeded US$200 billion and is the highest tonnage level since 1997， according to the World Gold Council’s Gold Demand Trends. Presently China and India remain the cultural heartlands of gold， generating 55% of global jewelry demand and 49% of global demand.

“Asian growth and optimism and the western desire to protect assets against uncertainty are the two main factors driving the 2011 figures. Looking particularly at Asia， there was a major boost to the overall figures from the increase in Chinese demand， which is a trend that we see continuing over the next year，” said Marcus Grubb， Managing Director at the World Gold Council.

“It is likely that China will emerge as the largest gold market in the world for the first time in 2012. What is certain is that the long-term fundamentals for gold remain strong， with a diverse and growing demand base， coupled with constrained supply side activity，” he added.

Globally speaking， gold used in electronics was up 1.1% to 330.4t worth a record US$16.7 billion， which is unexpected considering the increase in cost. Annual demand for technology as a whole was steady at 463.5t due to growth primarily in the Chinese market， said the World Gold Council.

The value of global jewelry demand in 2011 reached a new annual record of US$99.2 billion. India and China continue to believe in both the intrinsic and emotional value of gold jewelry which explains why overall global jewelry demand was resilient despite high gold prices， difficult eco- nomic conditions， volatility and currency weakness against the US dollar， the council added.

Gold， as the only financial asset with its own intrinsic value， is an essential part of world financial reserves. Due to its scarcity in the global strategic resources， it plays an irreplaceable role in safeguarding national economic and financial security. In particular， in the context of the stagnant world economy and the European sovereign debt， gold’s function to combat financial risk and safeguard asset security becomes more obvious. Therefore， various countries are striving to increase gold reserves.

Meanwhile， gold is an important tool for consumers to develop a rational portfolio of corporate accounts， fight inflation and diversify investment risks， hence their interest in possessing physical gold is constantly increasing， the China Gold Association remarked.

According to the association， with growth in people’s living standards and changes of consumption structure， the gold creativity， processing and retailing have developed to a new level. The processing base for domestic sales in Luohu， Shenzhen and the processing base for export sales in Panyu， Guangzhou have become two main gold processing bases.

In addition， the gold investment and trading market is developing quickly as gold is becoming a new hotspot for investment and enriches people’s investment portfolio.

Apart from its financial attribute， gold has a special natural quality. Along with the speeding up of the development of strategic new industries， gold is maintaining the momentum of rapid growth in the fields of electronics， aeronautics and astronautics， environmental protection， new energy， energy conservation， new materials， biological medicine， etc.

More data from the China Gold Association showed that in 2011 Chinese gold production amounted to a record high of 360.957t， up 5.89 percent year on year. For 5 consecutive years， China has been the biggest producer of gold in the world.