China May Match India as World's Biggest Gold Consumer on ‘Amazing’ Demand

China's gold consumption may rise to its rival India, the top user, as investors buy the metal as a store of value, said GFMS Ltd. and FCStone INTL.
Demand in China, the second largest economy in the world, nearly tripled to 580 metric tons last year from 206 tons in 2001, the data show producer-funded World Gold Council. Use in India may fall 5 percent to 26 percent this year from 963 tons in 2010, Morgan Stanley said in a report yesterday.
Bullion soared to a record $ 1444.95 an ounce on 07 March and 30 percent met last year for an annual gain of 10 º investors sought to preserve their wealth against inflation, unrest in the Middle East and degradation currency. Consumer prices in China rose 4.9 percent in February from a year ago, exceeding the government target of 4 percent for the year.
"The level of interest in gold as an asset class is simply amazing," said Jeffrey Rhodes, global head of precious metals INTL FCStone in Dubai, in an interview. "There is the possibility of China to reach India."
Protests in part linked to record food costs exploded in northern Africa and the Middle East this year, spurring conflicts and overthrow Libya's leaders in Tunisia and Egypt. The unrest pushed crude oil above $ 100 a barrel, rising concerns that global inflation will accelerate.
Purchases of China rose to 200 tonnes in the first two months of 2011, according to UBS AG (UBSN) on 1 March. The country imported over 300 tons last year, the People's Bank of China Yi Gang, deputy governor said in Beijing on 26 February.
Property, Cars
"We are seeing healthy demand" this year, Wang Lixin, general manager of China in the World Gold Council said yesterday. "Investors are still finding gold an attractive investment due to government restrictions on other high-cost investments like property and cars."
Lion Fund Management Co., the first vehicle of its kind in China to invest in exchange-traded products backed in gold abroad, was approved by the extent double its fundraising, the media manager Zi Yang affairs said on March 7.
The company has raised more than 3.2 billion yuan (483 million U.S. dollars) for the background, using the initial quota of 500 million U.S. dollars from the State Administration of Foreign Exchange, a company statement said on 11 January. gold investment in China can earn a 40 percent to 50 percent this year, said the council Feb. 17.
Culture imperative
Gold for immediate delivery was little changed at $ 1,429.26 an ounce at 3:19 pm in Mexico today and has advanced 29 percent in the last year. India and China account for 40 percent of global consumption, according to the council.
"In India a lot of demand is a cultural and social imperative, is to buy gold dowry and the wedding and that is something hard-wired in Indian society," said Paul Walker, CEO of GFMS researcher industry, in an interview from London. In China, the requirement about wedding "is less hard-wired," he said.
total demand in India surpassed China to 383.5 tons last year, the narrowing of 496.5 tons in 2001, the data show advice.
"There is absolutely no reason to believe that at some point demand from China could go beyond that of India," he said. FCStone Rhodes said demand in China and India could converge over the next five years.