China’s demand for gold continues to soar

Friday 17th February 2012

Global demand for gold in 2011 rose to 4,067.1 tonnes (metric tons), worth an estimated $205.5 billion, according to the World Gold Council’s (WGC) Gold Demand Trends.

The WGC says this is the first time global demand has exceeded $200billion and the highest tonnage level since 1997.

The main driver for this increase was the investment sector where annual demand was 1,640.7 tonnes up 5% on the previous record set in 2010 and with a value of $82.9 billion. The pre-eminent markets for investment demand in 2011 were India, China and Europe.

The amount of gold bought in China rose 20% in 2011 over the year before to 770 tonnes. That put China behind only India, where 933 metric tons were bought.

Jewellery demand in China increased every quarter of last year and was the largest single jewellery market worldwide for the second half of 2011.

There was also a surge in demand in Europe with the region posting its seventh consecutive annual gain to 374.8 tonnes. The WGC said Germany and Switzerland were the main drivers of growth in the region as the eurozone remains in turmoil and the need for asset protection continues to be a priority.

Central banks continued the trend established in 2010 of being net buyers of gold. Purchases by central banks soared from 77.0 tonnes to 439.7 tonnes.

This reflects the need to diversify assets, reduce reliance on one or two foreign currencies, rebalance reserves and ultimately protect national wealth, said the WGC.

“What we can see from these 2011 figures is that there were two main factors driving the results,” said Marcus Grubb, managing director, investment at the World Gold Council.

“Asian growth and optimism on the one hand and western desire to protect assets against uncertainty on the other.

“Looking particularly at Asia, there was a major boost to the overall figures from the increase in Chinese demand, which is a trend that we see continuing over the next year.”

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