Money

WGC issues glowing report on gold demand

By Cai Xiao (China Daily)
Updated: 2011-05-20 10:37

A gold jewelry store in Nanjing, Jiangsu province. The World Gold Council said in a report released on Wednesday that demand for gold jewelry on the Chinese mainland jumped by 21 percent year-on-year in the first quarter of 2011 to a quarterly record of 142.9 tons, valued at $10.4 billion.?[Photo/China Daily]

BEIJING - China's demand for gold continues to grow, led by the country's taste for gold jewelry, according to a report by the World Gold Council (WGC).

In the report released on Wednesday, the WGC said demand for gold jewelry jumped on the Chinese mainland by 21 percent year-on-year to a quarterly record of 142.9 tons, valued at $10.4 billion and accounting for 25.8 percent of total gold jewelry demand in the first quarter of 2011.

"Jewelry is by far the most dominant category in the Chinese gold market, compared with investment and technology," said Albert Cheng, managing director of the WGC's Far East branch.

He added that China's continued economic growth and public holidays will fuel gold jewelry demand in the second and third quarters of this year.

Cheng said that China has been the largest physical bar and coin investment market, whose growth in gold investment demand totaled 90.9 tons during the quarter. The annual gold demand was 187.4 tons in 2010, an increase of 71.1 percent over the previous year.

The report said gold demand in the technology sector is buoyant in China as the country becomes an increasingly important center for the manufacturing and assembly of electronics components.

According to the report, gold demand in the first quarter of 2011 totaled 981.3 tons, worth $43.7 billion.

"China's gold demand grew largely because its central government has a positive view on gold," Cheng said.

Cheng said that despite being the sixth-largest official holder of gold, the People's Bank of China (PBOC) has much lower gold reserves in terms of the percentage of its total reserves at only 1.6 percent.

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"Central banks in developing countries, including the PBOC, turn to gold purchases as a means of diversifying their reserves," Cheng said.

China has more than $3 trillion in foreign exchange reserves, Cheng said, and the government has expressed concerns about a weakening dollar.

Zhou Xiaochuan, the central bank governor, said in April that China's foreign exchange reserves were excessive, so the PBOC may set up a precious metals fund to diversify investment.

"China's gold import policies set almost no limits," Cheng said.

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