The Contrary Investing Report
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China Set to Become Largest Consumer of Gold This Year

by Brett on February 20, 2012

China is projected to surpass India as the world’s largest consumer of gold this year.  The South China Morning Post reports:

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.

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.”

The Chinese are big savers, and they love gold.  So there’s a big difference between this gold bull market, and the last one that ended in 1980 – the US consumer is no longer driving demand at the margins.

The SCMP article concludes with supply numbers – which only rose 3.7% last year – despite a gaudy 28% annual increase in the price of gold.  With oil relatively subdued around the $100 mark, mining bulls are probably shaking their heads wondering when gold miners are finally going to rock and roll.

gold miner ETF chart GDX

Gold mining stocks have rolled over since their August 2011 highs. (via StockCharts.com)


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