Gold consumption in China jumps 54% in first half of 2013 by Blanchard | August
skyrocketing in India as demand untamed by government restrictions
With the stock market making
big gains this year, many Western investors have pulled
capital from gold, primarily their holdings in exchange-traded
funds, to focus on equities. Not so in Asia, especially
China, where investors saw April's huge gold correction
as a chance to buy metal on the cheap.
And according to the China Gold Association,
they've been doing just that -- in droves. Gold consumption
in China jumped 54% in the first half of 2013, reaching
706.36 metric tons in the first six months. "Gold-bar
purchases surged 87 percent to 278.81 tons, while jewelry
gained 44 percent to 383.86 tons," Bloomberg reported.
Demand "unmatched" during correction
"China may overtake India as the biggest consumer as
early as this year," said Zhang Wei, an analyst at
Zhaojin Futures Co. "Demand in China has great potential
to improve further as the country encourages private sector
"China bought a lot when prices fell
below $1,350 in April thinking it will not fall further,"
said Chen Min at Jinrui Futures in Shenzhen. "They
bought much more than usual in April and May to meet the
need for later in the year."
"China's demand in April and May was
unmatched," said one Shanghai-based trader. "They
bought more than anyone and were consistent buyers even
after prices recovered a little."
"Big mamas" driving China's
And guess who's doing most of the
buying? Women. "Analysts say the purchases were powered
by Chinese consumers, with female buyers known as damas
a major factor," The Wall Street Journal reported.
"Dama, which means something akin to 'big mama' in
Chinese, conjures in China an image of a middle-aged woman
who keeps a tight grip on the family purse and an eagle
eye on gold prices in jewelry shops. Analysts say such consumers
have helped stabilize prices at a time when investors globally
have shed gold as the price of bullion has fallen."
"Older consumers -- women -- definitely
took up a larger proportion of consumers in the gold rush,"
said Jiao Guangyi, deputy general manager of the All Love
All Life gold store in Beijing. "They hadn't seen such
prices in a long time so it was a big draw for jewelry and
investment gold buyers."
"We are seeing a lot more of them,"
said Li Ying, a deputy store manager at a branch of the
high-end Chow Tai Fook jewelry store in eastern Beijing.
India's imports rise despite hurdles
And though China is set to overtake India in gold consumption
this year, don't count the latter out just yet even as its
citizens grapple with new government restrictions, including
a new 10% import tax, aimed to reduce the nation's account
According to Reuters: "Indians bought
more gold in July than June despite a series of moves by
the RBI to strangle supplies, and their insatiable appetite
has forced neighboring countries to take steps to curb their
own imports. India's gold imports hit $2.9 billion in July,
up from $2.45 billion in June, official data showed on Monday,
confirming Finance Minister P. Chidambaram's fears that
despite hikes in import duties and steps by the Reserve
Bank of India (RBI) to stem supply, demand is on the rise
And demand is being partly met through unofficial
channels. That is, smuggling. "There are signs now
that Indians may be bringing in gold through neighboring
countries, pushing their imports sharply higher as well
and prompting action by their governments," such as
Pakistan, Nepal, and Sri Lanka, Reuters noted.
Premiums at record levels
Demand is so high and product is so scarce that "gold
premiums in India, the world's largest consumer last year,
may extend their advance to a record," said Bloomberg.
"The fees paid by jewelers to banks and other suppliers
have jumped to about $40 an ounce over the London cash price
from $30 in the week ended Aug. 2, said Haresh Soni, chairman
of the All India Gems & Jewellery Trade Federation.
Premiums may surge to $100 if the government doesn't ease
the rules, said Bachhraj Bamalwa, a director at the federation,
which represents about 300,000 jewelers and bullion dealers."
With China's economy showing signs of shaking
off a slowdown, and India's love for gold still entrenched
in its culture, Asian demand will play a key role going
forward, especially during gold's seasonably strong fall
months. If a stock market correction in the West occurs
on tapering by the Federal Reserve or because of other factors,
Western capital might follow suit in a flight back to quality
and into gold. And that could mean "Katy, bar the door"
for gold prices.