Investment gold bars, coins in China projections 2012

Investment gold bars, coins in China projections 2012 : China is poised to surpass India as the world's largest gold consumer this year, with demand projected to climb 20 per cent, while India's bullion buying will remain dampened by the weak rupee and high inflation, according to the World Gold Council.

China's gold buying may also exceed India's for the first time on a full-year basis, although it already did so in the final quarter of last year.

Mainland gold jewellery purchases are expected to rise 10 to 20 per cent this year after surging 13 per cent to 510.9 tonnes last year, said the council's Far East managing director Albert Cheng Leung-ho.

Investment in gold bars and coins is forecast to jump 25 per cent, after swelling by 38 per cent to 258.9 tonnes last year.

"The mainland's middle class is growing rapidly and a consultancy has forecast that consumer spending in the country will account for 22 per cent of the world's total by 2020, up from 5 per cent in 2006, while that of the US will drop to 35 per cent from 40 per cent," Cheng said. "In terms of investment, the mainland is in the unique position of being an extremely convenient place to invest in gold, more so than even Hong Kong."

Based on Cheng's projections, gold demand in China could reach 923.8 tonnes this year. He expects India's demand to remain lacklustre after falling 7 per cent last year to 933.4 tonnes. China and India together accounted for just under half of global demand last year.

Global gold demand rose 0.4 per cent last year to 4,067 tonnes, driven by a 4.7 per cent rise in investment demand to 1,640.7 tonnes, according to the council's quarterly report. Jewellery demand fell 2.7 per cent to 1,962.9 tonnes.

China overtook India as the largest gold jewellery market in the second half of last year. India's jewellery demand shrank 14 per cent as consumers cut back on purchases after the weak rupee and high inflation pushed up gold prices in rupee terms.

Central banks' net purchases soared to a record 439.7 tonnes last year from 77 tonnes in 2010 and compared to a net disposal of 33.6 tonnes in 2009. Most of last year's purchases were made by Mexico, India, Thailand, South Korea and Russia.

Previously, some major European central banks had been net sellers of gold. About 70 per cent of the foreign exchange reserves of Germany, France and Italy were held in gold, Cheng said.

He said supply remained tight as mine production grew 3.7 per cent last year despite a 28 per cent jump in the gold price to US$1,572 an ounce.

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