No End In Sight For China’s Voracious Appetite For Gold, Says World Gold Council

Johannesburg-S.A. (Apr 20)  China’s gold demand increased six times over the last 10 years, but will increase further from here, according to the WGC.
The world’s biggest consumer of gold will only get bigger over the next several years. That’s the conclusion reached by the World Gold Council in a new report released today that examines supply in demand in China.

After demand hit a record 1,132 metric tons in 2013, the WGC expects “a year of consolidation” for China’s demand in 2014. However, following a pause this year, the council is forecasting renewed growth and at least a 19 percent increase in demand by 2017 to 1,350 metric tons.

While not without risks, the WGC’s bullish thesis is underpinned by rising incomes and a growing middle class in China, which may increase from 300 million to 500 million households over the next six years.

“The main basis for this expectation is the forecast increase in consumers’ purchasing power,” explained the World Gold Council. “Supposing conservatively that real incomes grow on average by 7.5 percent per annum, the compounding effect over the medium-term would leave them a third higher than in 2013. Therefore, barring a major, unexpected economic setback, it is hard not to be optimistic about growth in Chinese consumers’ purchasing power over the medium-term.”

China’s gold demand is made up primarily of jewelry and investment purchases, both of which are expected to continue to increase. Currently, China accounts for 26 percent of global private sector gold demand. That makes it the most important player in the global market, and one likely to drive prices higher over the next several years.