Has gold demand reached a Chinese summit?
Having been enlisted to go and research the Chinese markets, one of Reuter's senior analysts returns from his stint to decree that "if gold prices regain upwards momentum … we would expect a recovery in consumer confidence in gold."
According to Cameron Alexander's report, in the last ten years Chinese gold consumption has soared from 210 tonnes in 2001 to 850 tonnes in 2011.
But, despite that meteoric growth, 2012's weak Q2 left investors unsure if China had left room for more gold.
Alexander highlights how ". . . bullion flows from Hong Kong to mainland China posted a massive increase this year, with total volumes in the first five months rising over 700% year-on-year."
He also points out that those numbers had been ". . . highly inflated by growing round tripping between mainland China and Hong Kong whereby local companies used gold to engage in currency and interest rate arbitrage transactions."
The report summarizes that in spite of fluctuating gold demand, 2012 will still deliver as long as gold prices retain their upwards trend.
"China is still set to deliver healthy GDP gains this year, along with further growth in disposal income. This economic advancement, coupled with the rapid urbanisation of the country’s interior, should provide the platform for further consumption growth this year and indeed for some time yet. As such, Chinese demand for gold in the former of jewellery, bullion products and for industrial applications is likely to approach 900 tonnes in 2012"