The rout in gold that wiped out $56 billion of value this year is spurring consumer demand in China and India, the biggest buyers, and leading JPMorgan Chase & Co. and Bank of America Corp. to say prices are bottoming.
Sales of jewelry, coins and bars will reach as much as 1,000 metric tons in India and China in 2013, valued at a combined $87.6 billion, the World Gold Council estimates. Prices will average $1,300 an ounce in the fourth quarter, or 5 percent less than now, the median of 17 analyst estimates compiled by Bloomberg shows. Bank of America is the most bullish, predicting a fourth-quarter average of $1,495, and JPMorgan anticipates rising averages in every quarter through the end of next year.
While investors from John Paulson to George Soros sold after the bear market began in April as some investors lost their faith in gold as a store of value, the slump boosted sales in Asia. Australia & New Zealand Banking Group Ltd., Deutsche Bank AG and UBS AG opened vaults in the region this year and U.K. bullion exports rose eightfold, a sign to Macquarie Group Ltd. of the flow of metal from west to east. Asian buyers are being attracted by prices that are now 29 percent below the record $1,921.15 reached in September 2011.
“Whenever we have a bit of idle cash, we think of buying a few pieces,” said Wang Xiang, a 70-year-old from the eastern Chinese province of Anhui, as he bought a gold pendant for his grandson in Beijing’s Caibai Jewelry store, the nation’s largest by sales. “We don’t know how to invest otherwise and that’s the traditional way of preserving wealth.”