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Yellow metal demand wanes in first quarter

By LYU CHANG (China Daily) Updated: 2015-05-15 07:32

Yellow metal appetite waned in China during the first three months of the year as dama, or the middle-aged wealthy Chinese women investors, shifted focus to the bullish stock market and reduced purchases, an industry report said on Thursday.

Gold demand fell by 7 percent to 273 metric tons on a year-on-year basis between January and March in China, the World Gold Council said in its quarterly report, adding that jewelry demand fell by 10 percent during the period.

Global demand for gold remained more or less flat at 1,079 tons during the same period, the WGC said. The demand included retail, central bank and investment purchases, with China and India accounting for about half of the total.

Roland Wang, managing director of the World Gold Council China, said that the stock-buying frenzy coupled with a slowing economy led to a temporary slide in China's gold market.

"More and more people are opting to open stock trading accounts amid a bull run in the stock market. Some of them are dama, who used to drive the gold-shopping rush," he said.

Meanwhile, a crackdown on corruption and luxury gifts since last year by the central government has continued to weigh on the Chinese market.

Wang expressed confidence that gold demand in China will remain stable and healthy in the long term as yellow metal prices stabilize and investors use the wealth gained from capital markets for fresh purchases.

"Gold is still a good long-term hedge for Chinese investors, especially against inflation or a declining dollar," he said.

First-quarter demand for gold in China was still 27 percent higher than the five-year quarterly average growth and this confirms the long-term trend, Wang said. Full-year demand for gold is expected to be about 900 to 1,000 tons in China, the WGC report said.

Despite being the world's largest gold consumer and producer, China has gained little influence on global pricing power. In September, the Shanghai Gold Exchange launched an international gold trading board with yuan-denominated contracts.

Wang said that it is an important step which will put China on a fast track to set the benchmark price in Asia, but the country needs to allow the yuan to float more freely in order to have more say on gold pricing.

"The currency is not freely convertible in China and it should adopt a more open currency policy so that it can connect completely to the international gold market," he said.

Gold prices in the first quarter declined by 6 percent to $1,218.5, a troy ounce, the report said.

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