China May Overtake India in Gold Demand

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China May Overtake India in Gold Demand

Source: Bloomberg, Sophie Leung��(7/24/09)

"Total Chinese demand for gold was six times that of India in the first quarter. . ."

China may overtake India to become the world's top gold consumer this year, the World Gold Council said, as the nation became the first of the major economies to rebound from the global recession.

Jewelry demand in China expanded in the first quarter while dropping in India, Marcus Grubb, a managing director at the London-based council, said today at a conference in Hong Kong. Chinese gold demand will keep rising, he said.

China's economy grew 7.9% in the second quarter after a 4 trillion yuan ($586 billion) stimulus package spurred record lending and consumption. India's gold purchases slumped 54% in the six months ended June after a decline in the rupee pushed up the cost of owning bullion, the Bombay Bullion Association said.

"There is a possibility that China might overtake India as the world's largest gold consumer this year," Hou Huimin, deputy head of the China Gold Association, said by phone from Beijing today. "India's gold consumption is reportedly dropping this year due to the financial crisis."

Total demand from India in the first quarter fell 83% to 17.7 metric tons, from 107.2 tons a year earlier, according to figures from the World Gold Council. Purchases in China rose 1.8% to 105.2 tons from 103.3 tons. Total Chinese demand for gold was six times that of India in the first quarter, the council said in May.

"China's consumption is growing and this year's will surely be more than last year's," Hou said.

China consumed nearly 400 metric tons of gold last year, while demand in India was more than 650 tons, according to council data, which cited statistics from GFMS Ltd. Global demand rose 3.8% to 3,658.6 tons, or $101.8 billion.

Bullion prices have gained 7.6% this year as the global recession spurred demand for safe haven assets. Gold for immediate delivery was little changed at $949.65 an ounce at 5:39 p.m. in Hong Kong.

China, the world's biggest gold producer, has increased reserves by 76% to 1,054 tons since 2003 and has the world's fifth-biggest holdings by country, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in April.