In amongst all the comment and analysis regarding the effects of the various Middle Eastern and North African power struggles on the gold price, the latest news on Chinese domestic gold demand has almost passed by unnoticed. According to Peer Hickson, the global commodities strategist for gold-focused Swiss Bank, UBS, in a report by Bloomberg, Chinese gold demand hit no less than 200 tonnes in the first two months of the current year. If that is extrapolated over a fill year - and the gold purchasing momentum caused by inflation-nervous purchasers suggests that there is even a possibility that demand could rise - this would mean that the Chinese consumer could be in line to buy close on 50% of global mined gold (and this does not include what the country's Central Bank may be salting away as well.)
The 200 tonnes in two months figure is MASSIVE. We recall that only a couple of months ago we were reporting that Chinese gold imports in the first 10 months of 2010 totalled 209 tonnes, itself a 500% increase on the previous year. It now seems that demand by individuals is reaching almost frightening levels. Not only is jewellery demand seen as being up by 70% year on year, but investment demand (coins and bars as opposed to jewellery, which has been the main outlet for gold purchases in the past) is also coming on strongly from virtually nothing a couple of years ago to a WGC estimate of close on 180 tonnes in 2010. If the pace of growth continues investment demand alone could reach as much as 300 tonnes in 2011!
If the Chinese Central Bank is absorbing domestic production, as many believe then total Chinese demand this year could soar past India's. The potential is almost beyond belief. Indeed Chinese offtake is more than matching any disposals from gold ETFs, and with the continuing justified worries about inflation in China the momentum is likely to continue regardless of the gold price elsewhere
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=121959&sn=Detail&pid=102055
Friday 4 March 2011
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