Gold Demand in China Slumps 37% Amid Drive to Root Out Graft
Gold demand in China shrank for a third quarter as slumping prices failed to boost the purchases of bars, coins and jewelry in the world’s biggest user and officials pressed on with a nationwide anti-graft campaign.
Buying by Asia’s largest economy tumbled 37 percent to 182.7 metric tons in the three months to September from the same period in 2013 as last year’s price-driven surge in demand wasn’t repeated, the World Gold Council said in a report today. India was the only Asian economy tracked by the producer-funded group that bought more bullion than China as usage across the biggest consuming region contracted 15 percent to 473.4 tons.
An anti-graft drive in China this year hurt demand for luxury goods including bullion, while volatility that sank to a four-year low damped interest in the metal as an alternative investment. Banks including Goldman Sachs Group Inc. expect prices to extend losses, in part as the buying frenzy that accompanied gold’s drop into a bear market in April 2013 hasn’t been sustained. China surpassed India as the world’s largest gold user last year as prices retreated 28 percent.
“The scale of 2013’s exceptional buying continued to overshadow the market,” the London-based council said in the quarterly report that surveys global demand patterns. “The quiet environment provided China’s notoriously price-savvy investors with a further reason to stay out of the market.”
Spot gold lost 3.4 percent this year to $1,161.14 an ounce at 8:03 p.m. in Shanghai, after dropping to $1,132.16 on Nov. 7, the lowest since April 2010. Prices fell 9 percent in the three months through September, the first quarterly drop in 2014, compared with a 7.7 percent gain a year earlier.
‘Catch Its Breath’
Jewelry consumption in China fell 39 percent to 147.1 tons in the quarter, while demand for bars and coins slid 30 percent to 35.6 tons, the council said. Usage in the nine months to September was 638.4 tons, according to Bloomberg calculations based on figures in quarterly WGC reports in May, August and today. Last year, mainland demand was a record 1,275.1 tons, according to the council at a briefing in Shanghai today.
“China’s jewelry market continued to normalize following last year’s rapid expansion,” the council said. “Chinese investment demand this year has paused to catch its breath. Fourth-quarter bar and coin demand is shaping up to be much the same — steady, but unremarkable.”
Buying in Indonesia, Southeast Asia’s largest economy, plunged 45 percent in the period as the Presidential election in July created a degree of political instability, according to the council. Japan’s bullion purchases fell 45 percent as a new sales tax damped demand, while consumption in Thailand fell 42 percent amid the unstable political climate, it said.
Bullion will extend losses as the U.S. economy recovers and the dollar strengthens on prospects for higher interest rates, according to Goldman, which has predicted that bullion may end this year at $1,050. The chances are increasing that the metal will slip to $1,000, according to Societe Generale SA.
Source: bloomberg – Gold Demand in China Slumps 37%
