World Gold Council says China’s private sector gold demand will rise

In its recent report, “China's gold market: progress and prospects”, the World Gold Council (WGC), notes that China’s private sector demand is set to increase. Also, Chinese demand in 2013 saw the country become the world’s largest gold market and the report suggests that while 2014 is likely to see consolidation, the succeeding years are likely to see sustained growth. The private sector demand is predicted to rise from the current level of 1,132tonnes(t) per year to at least 1,350t by 2017.

According to Albert Cheng, Managing Director of the Far East at the World Gold Council, “Whilst China faces important challenges as it seeks to sustain economic growth and liberalise its financial system, growth in personal incomes and the public’s pool of savings should support a medium term increase in the demand for gold, in both jewellery and investment.” The report suggests that in the next six years, China’s middle class is expected to grow by over 60 percent or 200m people, to a total of 500 million. Comparing this to the total population of the US, which stands at 319m, puts the size of this new market of affluent consumers, with the propensity to buy gold, in perspective. Added to this is the rising real incomes, a deepening pool of private savings and rapid urbanisation across China suggesting the outlook for gold jewellery and investment demand in the next four years would remain strong.

Cheng also noted that, “Since liberalisation of the gold market began in the late 1990s and the subsequent offering of gold bullion products by local commercial banks from 2004, we have witnessed astonishing increases in demand for gold from consumers across the country. The cultural affinity for gold runs deep in China and when this is combined with an increasingly affluent population and a supportive government, there is significant room for the market to grow even further. The country is now at the centre of the global gold eco-system.”

The report also concludes that: Gold is seen as a stable, accessible investment by the Chinese consumers, especially as house prices are rising and due to the lack of alternative savings options. Also, China is the world’s number one jewellery market, nearly trebling in size over the past decade - at 669t in 2013, it accounts for 30% of global jewellery demand. Demand is estimated to reach 780t by 2017. Although 40 percent of jewellery consumption relates to weddings, in China, demand goes beyond occasion as 80 percent of consumers surveyed for the report planned to maintain or increase their spending on 24 -carat gold jewellery over the next 12 months believing that gold will hold its long – term value and based on their expectation to have a higher level of disposable income. Also, China has gone from being a minor producer to the world’s largest source of mined gold - in the past ten years production has doubled from 217t to 437t.