JOHANNESBURG (miningweekly.com) – China and India were currently the consumers of more than 60% of global gold, World Gold Council Far East MD Albert Cheng said on Tuesday.
Cheng, who was speaking to Mining Weekly Online from the London Bullion Market Association (LBMA) conference in Rome, said China was on track to consume at a record level of more than 1 000 t of gold by year-end.
Despite Indian gold consumption set to be less this year than last year owing to government import restrictions, Cheng calculated that 2013 Indian consumption would also more than likely hit the 1 000 t level.
“This is very significant and looks like being sustained,” Cheng added.
Total global gold demand by year-end, he added, was expected to be 4 000 t.
Besides becoming the world’s largest consumer of gold, China is also in number-one position as a gold producer.
In 2012, the country produced 342 t of gold and consumed 840 t, importing 498 t.
South Africa, once the world’s largest producer of gold, managed an output of only 167 t in 2012.
China consumes all the gold it produces and imports the additional amount it requires from international markets through the Shanghai Gold Exchange.
Chinese people buy 24-carat gold jewellery and gold bar and tend not to recycle as much gold as many other gold-consuming countries.
Chinese consumers have a choice of between 70 000 to 100 000 gold retail outlets.
Chinese banks that import the gold are obliged to obtain import permits from the country’s central bank, which grants them liberally.
“Obtaining approval is just a formality and the import volume is not restricted,” Cheng tells Mining Weekly Online.
In contrast, the Indian government has increased import duty on gold five times, from 1% in January 2012 to 10% currently, and has increased import duty on gold jewellery to 15% from 10% in September.
The latest LBMA conference, Cheng said, confirmed that investment in gold was firmly on the radar screens of investors.
“In the last few years, we’ve seen one financial crisis after the other and people are concerned,” he said, adding that gold had once again been acknowledged as the ultimate store of value.
Bloomberg reports that sales of gold products, such as bars, by China National Gold Group Corporation, owner of the country’s largest deposit of the metal, rose 40% in the first half of 2013.
In August, China’s central bank said that it would let more banks import and export gold and allow overseas companies more access to gold trading.
Cheng pointed out that rising disposable income levels were supporting gold demand growth in China.
The country also has leeway to increase its official gold holdings from the current 1 054 t of reserves, which are seen as being inadequate when compared with the 8 133 t held by the US and 3 408 t by Germany.
Gold accounts for 1.6 % of the total reserves held by the People’s Bank of China.
LBMA Rome 2013 arrived at a collective forecast that the gold price would climb to $1 405/oz in 2014, from $1 294/oz at the time of going to press.
The conference was attended by more than 800 delegates from 300-plus companies who listened to 50 speakers talk on the merits of short-term and long-term gold investment.