WGC : China Overtakes India As Top Gold Consumer
05/17/2012| 01:03am US/Eastern
--1Q Indian gold demand drops 19% on-year to 207.6 metric tons
--1Q Chinese gold demand rises 7% to 255.2 tons
--China still on track to overtake India as world's top gold consumer on a yearly-basis in 2012
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By Francesca Freeman
China took over from India as the world's top consumer of gold in the first quarter of this year, cementing expectations that China will be the dominant buying force in the gold market in 2012, the World Gold Council said Thursday.
Indian gold demand dropped 19% on the year in the first three months of 2012, to 207.6 metric tons. The domestic gold sector was rattled by strikes following the announcement of new taxes on the gold trade and weakness in the Indian rupee made dollar-denominated gold more expensive for Indian buyers.
In contrast Chinese gold demand rose 7% in the same period, to 255.2 tons, according to the WGC.
Between them, China and India accounted for 54% of global gold demand in the first quarter.
Fears over high domestic inflation rates, as well as a search for new investments by a growing middle class, has been luring Chinese investors to gold in recent years. Chinese investors tend to view the precious metal as both a commodity and as a store of wealth. Marketing of the precious metal has also increased in recent years.
According to WGC data, gold demand in China jumped 20% last year, to 769.8 tons, spurred by an almost-40% rise in bar and coin purchases. This compares with a 7% fall in total Indian demand, to 933.4 tons, after a weak rupee sent domestic gold prices soaring to a new record in November.
Although Chinese demand growth is starting to moderate and Indian gold demand is expected to pick up this quarter as the market adjusts to the new legislation and tax structure, China should remain the world's top gold consumer for the balance of the year, said the WGC.
"We still expect China to exceed India this year in overall gold demand," Marcus Grubb, WGC managing director of investment, told Dow Jones Newswires in an interview.
In a press briefing held in Singapore Thursday, Albert Cheng, Far East managing director at the WGC, said he expects Chinese gold demand to reach 900 to 1,000 tons in 2012. Indian demand, on the other hand, should total 800 to 900 tons this year, he said.
-By Francesca Freeman, Dow Jones Newswires; +44 (0)20 7842 9412; email@example.com (Clementine Wallop in Singapore contributed to this report)