Chinese Gold Demand Dropped 19% in 1H 2014

China’s gold demand fell 19 percent in the first six months of this year as investors bought fewer bars and coins, offsetting increased demand for jewelry, the China Gold Association said.

Consumption in China, which passed India last year as the world’s biggest user, slid to 569.5 metric tons, the Beijing-based association said in a statement today. Demand for bars sank 62 percent, while gold use in jewelry rose 11 percent, according to the statement.

An 8.9 percent price rise this year amid unrest in Ukraine and the Middle East has hurt consumption in China, which is expected to be “more or less the same” on a full-year basis in 2014, Zhang Bingnan, vice-chairman and general secretary at the association, said in an interview in Singapore last month. Demand will rise about 25 percent in the next four years as an increasing population gets wealthier, the London-based World Gold Council said in April.

“China bought too much last year and there’s significant stock built up onshore that will take some time to work through,” Victor Thianpiriya, commodity strategist at Australia & New Zealand Banking Group Ltd., said by phone from Singapore. “Demand was very strong last year and not something people expected to be repeated this year. The investment bar side tends to be more speculative and price sensitive, while jewelry is pretty static.”

Purchases in China accelerated last year to a record 1,176.4 tons, after a 28 percent price slump that was the biggest annual drop in more than three decades. Banks including Goldman Sachs Group Inc. and Morgan Stanley expect gold to extend declines even as holdings in bullion-backed exchange-traded products rebound from the least since 2009.

via Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza