Chinese Demand for Gold Faces 17 Percent Drop

The China Gold Association said demand in the Asian nation, the world’s largest consumer, may decline 17 percent this quarter from a year earlier after a 2013 surge in purchases of bars and jewelry.

Demand may drop to 250 metric tons from 300 tons, Zhang Yongtao, vice chairman of the Beijing-based group, said in an interview March 7 in New York. Usage surged 41 percent to 1,176.4 tons in 2013 from the year before, the group said last month.

Buyers who snapped up bullion in 2013, during the biggest price slump in more than three decades, may be deterred by this year’s rebound in prices, which are off to the best start since 2008. Gold has risen 11 percent since December as faltering global growth and tension in Ukraine boosted the metal’s appeal as a haven. The drop in sales may be brief as prices stabilize and buyers return for holiday purchases, Zhang said.

“Last year was a peculiar year when we saw a big fall in prices,” Zhang said. “People bought a lot of gold, and I think demand will start climbing again once the festive and marriage season begin later this year.”

The association expects annual demand will rise to about 1,176 tons. Production in 2014 will match last year’s output of 428.16 tons, Zhang said.

“China’s gold consumption this year will probably be sustained above 1,000 tons as long as the economy here will grow at 7 percent,” Albert Cheng, the World Gold Council’s managing director for the Far East, said last month from Hong Kong. Cheng pointed to wealth accumulation among China’s growing middle class.

via Bloomberg

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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