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Gold Investment Demand "To Rise by 10% in China"


CHINESE Gold Investment demand will grow 10% this year as buyers seek a refuge from Europe's financial crisis, according to a senior figure at China's largest bullion bank.

Asian Gold Investment is set to grow because investors see gold as a safety net against the prospect of weakening currencies and the ongoing European debt crisis, says Zheng Zhiguang, general manager of precious metals at the Industrial and Commercial Bank of China.

"Investors here want to hold part of their assets in gold to hedge for the risks, especially now that the financial crisis has evolved into a sovereign crisis," says Zheng.

ICBC announced last month it intends to become a market maker in London's wholesale Gold Market.

China is on course to overtake India this year as the world's biggest buyer of Gold Bullion.

Chinese Gold Investment demand – defined as demand for Gold Bars and coins – was a record 98.6 metric tonnes in the first three months the year, 13% higher the same period in 2011, according to figures from the World Gold Council.

For 2011 as a whole, Chinese Gold Investment demand was 258.9 tonnes, a 38% gain compared with 2010, as overall demand gained 20% to 769.8 tonnes.

"We are confident China will become the largest source of demand for gold this year," said Albert Cheng, the WGC's Managing Director, Far East, speaking last month.

"Over the next two to five years, China and India will go neck to neck and may account for more than 50% of world demand," he added.

By contrast, Indian gold demand was lower in the first quarter of this year than in Q1 2011, with Gold Investment down 34%.

The WGC cites a number of factors that have impacted on Indian Gold Investment demand, including a new tax on gold jewelry, the higher import duties on gold and the weakness of the Rupee. 

"As we previously forecast it is likely China will become the largest source of demand for gold in 2012", said Marcus Grubb, the WGC's Managing Director, Investment, speaking at the launch of the latest Gold Demand Trends, the WGC's quarterly report on the key drivers of gold demand and supply.

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Pol Molinas is working as a research assistant at BullionVault, the No.1 gold and silver ownership service for private investors.

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