This is the first time in modern times that is it has happened and despite Indian buying also rising, China has become the top player the World Gold Council revealed earlier today.
“Although the consumer response (buying) was international across a lot of smaller markets – like Turkey, Thailand, Indonesia and Vietnam – you still saw two markets really dominating,” said Marcus Grubb, managing director for investment strategy at the World Gold Council, in reference to China and India. Collectively, these two nations accounted for more than half of global gold demand last year, according to the WGC’s data.
China purchased a record 1,065.8 metric tons during 2013, a year-on-year surge of 32%, the WGC said in its quarterly demand trends report.
“We’ve had quarters where China has been the No. 1 market overall….,” said Grubb said. “But that was the first calendar year where China has been No. 1, in recent decades anyway.”
Many analysts have been opining that China had become the world’s largest buyer; the widely followed WGC report in essence makes it official. The development is especially remarkable since it wasn’t that many years ago when Chinese citizens were not allowed to own gold bullion, prior to deregulation, Grubb pointed out.
“About a little more than a decade ago, the Chinese gold market was deregulated again after decades of regulation whereby for private investment, the population was not allowed to own bullion gold,” Grubb said. This means existing stocks of gold in the country are less than half of the stocks in India, historically the largest consumer. Also, the Chinese per-capita rate of buying is less than in India, Grubb said.
“What you have seen in the last six years is a (Chinese) market move from being almost insignificant – with a good level of mine production but no imports – to becoming the No. 1 market with an incredible rate of growth, more than doubling in roughly five to six years,” Grubb said.
The second-quarter demand was the strongest for China as global buying picked up after the sharp fall in dollar prices for gold.
“While some slowdown naturally followed such a powerful surge, demand picked up again throughout the fourth quarter as attention turned to the Chinese New Year, a traditional occasion for gift-giving,” the WGC said.
Indications are that demand remained “healthy” in conjunction with and after recent Chinese New Year celebrations, the WGC said. In fact, Grubb added, there was one day last week in which 29 metric tons was snapped up on the Shanghai Gold Exchange.
“So it seems as if demand is continuing in China even after the New Year period,” Grubb said.
