Gold Silver Worlds: China has become the world’s largest gold market recently. India, who used to have the largest gold market, was burned by its own government imposing more than 20 restrictions in a matter of 2 years. China’s private-sector demand for gold in 2013 reached a record level of 1,132 tonnes. The World Gold Council (WGC) predicts gold demand growing 20 percent by 2017.
China is becoming an economic powerhouse, a real magnet of wealth. No wonder that gold is flowing to China, as gold flows to the places where wealth is created.
In this article, Frank Holmes from USFunds.com explains the drivers behind the Chinese gold market, and how China established to become the world’s largest gold market. In sum, he says that consumer demand has exploded because the purchasing power of the middle class has increased, that industrial demand has gone up as well, while the central bank has exchanged much of its dollar into gold.
Driver 1: Jewelry is still the top demand driver
The WGC report also reaffirms the ongoing power of the Love Trade. The Love Trade, one of the two main drivers of gold along with the Fear Trade, relates to the cultural affinity for the precious metal particularly in Asia, India and the Middle East. Consumers continue to purchase gold jewelry and coins year-after-year, and demand rises in synch with gift giving for religious holidays and celebrations.
As you can see in the chart below, since 2004 the volume of gold jewelry consumed in China has tripled. What’s more, China surpassed India as the world’s largest consumer and manufacturer of jewelry in 2013. According to a recent Reuters’ article, gold jewelry sales in India slowed by 10 percent since import restrictions were imposed on the country last year – a likely factor placing China in the top spot.
China Jewelry consumption from 2004 till 2014