China To Surpass India As World's Largest Consumer Of Gold

Michael Teague |

The sudden and precipitous collapse of the price of gold over the course of 2013 has been one of the recurrent disaster stories of the year, and a daily subject of conversation especially when it comes to the future of the Federal Reserve’s economic stimulus policy.

But while the general trend among US and Western investors seems to have so far been a spirited race for the exits when it comes to the yellow metal, the so-called emerging markets of the Asian continent are dealing with what might be called a photonegative of the US gold problem.

India, for instance, has been taking little-reported but surprisingly interventionist steps to curb consumption of gold at home. Last month, the Indian government implemented a rule that would force 20 percent of the country’s gold imports to be reserved for the purpose of making jewelry destined for shipment abroad.

Prior to that, the government doubled the tax on gold imports, and not two weeks ago, the Indian Minister of Finance announced an 845 metric ton cap on the amount of gold that could be imported into the country in 2013. This direct interference into the nation’s economy would likely create a political scandal in the US and in Europe, amid accusations of socialism, redistribution of wealth, and authoritarian government. India, after all, consumes some 20 percent of the global gold supply.

On Monday, gold was up 1.8 percent to $1,335.70 per ounce on news that China is likely to take over the spot as the world’s largest consumer of gold, as soon as this year.

China is currently the world’s second largest gold-consuming country. It differs from its rival/emerging market peer India, however, in that it is also the world’s largest producer of gold. Still, for the first half of 2013, net imports of yellow metal more than doubled to 493 tons.

In an interview with Zhang Wei, an analyst at ZHaojin Futures Co. in Zhaoyouan, China, Wei asserts the recent drive to encourage private ownership, and especially private sector ownership, will see demand increase even further in the world’s most populous country.

Thus, while gold has been down and out of late, it may find its new home in China, where, for the time being, it is still apparently very welcome.

 

[Image: a Gold Shop inside the Beijing International Airport, courtesy of WIkimedia Commons]

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