China’s falling out of love with gold, demand drops 19%

China’s falling out of love with gold, demand drops 19%

China’s demand for gold slumped 19% in the first half of 2014 as lower sales of bars and coins offset a rise in jewellery acquisitions, latest figures from the China Gold Association show.

Gold consumption in the country, which last year overtook India as the world’s largest gold buyer, fell to 569.5 tonnes, with the weakness in the yuan adding to higher spot prices, while the heavy buying last had seen stocks rise to unsustainable levels, Bloomberg reports.

Brokers said gold bars are the most speculative and price sensitive area of the market. China bought a record 1,176 tons of gold in 2013, but is expected to be slightly below that figure this year.

The drop was somehow expected. Customs data for May from Switzerland – the main trading hub for the global physical trade in gold – showed a 59% drop in exports to Hong Kong to just over 10 tonnes. Cargoes going to Mainland China plummeted by 83.5% the same month to a mere two tonnes, compared to 37 tonnes back in February.

However, long-term demand from the country is expected to expand to at least 1,350 tonnes by 2017, due to rising wealth, the World Gold Council noted in April.

In addition to being the world’s biggest consumer of bullion, China is also the world’s largest source of mined gold. Over the past decade, production has doubled from 217 tonnes to 437 tonnes.

China’s falling out of love with gold, demand drops 19%

Courtesy of the World Gold Council. (Click to enlarge)

Gold demand is expected to improve through the Southeast Asia region in the second half of the year as the Singapore Exchange gears up to launch a new physically-delivered gold contract in September.

The city is seeking to become a gold trading hub, and has removed a goods-and-services tax on gold to attract clients.

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