China's Growing Demand to Cushion Gold Prices in 2014
Hong Kong (Feb 13) To Chinese investors, gold is acting like a safe-haven alternative asset and store of value in times of economic uncertainty. And this buying will provide a cushion for gold.
China's gold consumption surged 41% last year, surpassing 1,000 tons for the first time ever, according to a report Monday from the China Gold Association. Total 2013 gold consumption in China hit an extraordinary 1,176.40 tons.
Spurred by the steep slide in prices - gold shed 28% last year, marking its first annual loss in 13 years - bullion demand soared 57% to 375.73 tons and jewelry demand rose 43% to 716.50 tons.
The hearty surge in demand propelled China to become the No. 1 gold consumer in the world, leapfrogging India for the top spot.
"The sharply lower prices attracted a lot of Chinese consumers looking for bargains," Chen Min, an analyst at Jinrui Future in Shenzhen, told Reuters. "Gold will continue to be an attractive investment in China in the near term as prices look steady near $1,200 an ounce."
India has historically been the primary influence for gold prices. India did help goose gold Tuesday. It released a recommendation from India's trade ministry to ease curbs on gold imports, after a 77% drop in imports last month helped narrow the country's swollen trade deficit. First levied in March 2012, and raised three times to 10%, the duty choked off gold consumption among Indian buyers - who typically purchase more gold than any other country.
But should Chinese consumers continue to view gold as store of value, the substantial size of China's market is enough to shift the historical undercurrents and fuel a significant gold rally.
Chinese consumers also continue to bank on gold as concerns mount about the state of the Asian nation's economy. Fresh reports have shined a light on escalating troubles in China's real estate and financial markets that could significantly rattle the world's second-largest economy and send ripples around the world.
And the robust figures don't include demand from the country's central bank, whose gold reserves remained steady at 33.89 million ounces, or 1,054 tons. People's Bank of China last increased its gold reserves in April 2009. But speculation is PBOC has been bulking up its yellow metal stores and is set to soon announce heftier figures.
Spot gold closed in New York up $12 to $1302, while spot silver added 28 cents to $20.50.
(Source: MoneyMorning)
