The Middle Kingdom is nipping at India’s Heels for the Title of World’s Biggest Gold Buyer. Find out what this can mean for Gold Demand.
India is keeping a close eye on its rearview mirror.
For now, they remain the world’s largest consumer of gold – but that gap has narrowed significantly over the past year.
According to the World Gold Council, India consumed 862 metric tonnes last year, while China’s consumption was 776 tonnes.
By comparison, the gap was over 206 tonnes in 2011.
On a per capita basis, India demand still outpaces the Chinese – but with China’s ballooning population and reigning title as the world’s biggest gold producer, we can safely assume that an undisputed King of Gold is fast emerging.
The Council predicts that by this November, China could overtake India…and that has massive implications for the yellow metal.
You see, looking at how gold prices have been behaving so far in 2013, you would think the bullion market has moved into bearish territory.
While prices may be hinting some downward movement of late, there’s hardly a need to panic.
That’s because gold demand has not slowed – not by a long shot.
The numbers don’t lie.
The Council reported last week that Q4 2012 global demand reached a staggering 1,196 tonnes – a four percent jump from Q4 2011.
After a somewhat tumultuous year for gold, the late surge still managed to boost annual 2012 consumption to a record value of US$236.4 billion.
Again, we have the two most populous nations in the world to thank for that.
Gold investment and jewellery demand in India hit new highs in 2012, while overall demand in Q4 2012 alone was 41 percent higher than the previous Q4.
China – after seven straight quarters of slowing growth, saw a Q4 boost of its own, with investment and jewellery demand also exceeding that of the previous Q4.
With these two gold powerhouses racing neck and neck, there’s every reason to believe the world’s still bullish for gold.
Although neither nation appears to be losing its appetite for bullion anytime soon…China could be the one pulling away in the demand race as early as 2015.
A number of Chinese gold analysts are predicting that within the next two years, domestic demand will outstrip supply by at least 550 tonnes.
Even before that point is reached, you can expect China to begin knocking feverishly on other countries’ doors for their ingots.
But they may have to pay a premium in order to get their hands on them.
As I had explained in my previous articles, the official sector remains on a buying spree, taking an increasingly large chunk of available gold out of circulation.
Central Banks around the world amassed the most amounts of gold holdings since 1964, buying up 535 tonnes of it last year.
And that trend looks to continue, says the World Gold Council.
It’s simple economics, my friends.
The global economy is still very much on shaky ground. Naturally, gold remains a safe haven for investors and banks alike.
If demand continues to climb the way it is, it’s practically a foregone conclusion that prices will need to catch up.
At current levels, buying now is a no-brainer.
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