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China Surpasses India as World’s Top Gold Consumer

Release Date: 
Thursday, May 17, 2012

The price of gold rose sharply today on bargain hunting and increased physical buying. Gold was $38.37 higher as of 8:54 a.m. Pacific Time on the New York Spot Market, trading at $1,579.67 per ounce. Spot silver was $0.89 higher, trading at $28.26 per ounce. (Click here for the most current spot prices.)

"Since yesterday we have seen more interest come through from physical buyers...because prices have come down substantially," said Afshin Nabavi, head of trading at MKS Finance. "But there is more upside than downside risk for gold at the moment as the political situation is very jittery with tension in Iran and economic problems especially in the euro zone. People will want to buy physical gold again. Those who went out since December are now waiting for prices to stabilize before getting in again."

"This is a value buy; in volatile times people go back to the charts," said Nick Moore, global commodity analyst at RBS. "We have had a sharp sell off which has uncovered the value of the metal." VTB Capital in a research note, "evidently, some buying on the dips emerged above December lows also with fresh physical inflows with prices starting to look attractive."

China has overtaken India as the world's top consumer of gold in the first quarter of this year and is likely to be the gold leader for 2012, the World Gold Council (WGC) said. Chinese gold demand rose 7 percent in the first quarter, to 255.2 tons, according to the WGC. Although Indian demand in Q1 was hampered by a government tax that has since been overturned, along with a weak rupee, the WGC expects Indian demand to increase this quarter as the market adjusts.

China and India accounted for 54 percent of global gold demand in the first quarter. According to WGC data, gold demand in China jumped 20 percent last year, to 769.8 tons, led by a 40 percent rise in bar and coin purchases. This compares with a 7 percent drop in total Indian demand, to 933.4 tons. Albert Cheng, Far East managing director at the WGC, said he expects Chinese gold demand to reach 900 to 1,000 tons in 2012 while Indian demand may reach 800 to 900 tons.

(Source: "China Overtakes India as Top Gold Consumer," Wall Street Journal, May 17, 2012; "China tops India as No. 1 gold consumer: WGC," MarketWatch, May 17, 2012; "PRECIOUS-Gold off 4-1/2 month low on increased physical buying," Reuters, May 17, 2012)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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