By Allen Sykora
August 15, 2013
(Kitco News) – China is on a pace for record gold demand in 2013, putting it neck-and-neck in a race with India to see which nation will be the world’s largest consumer this year, said an official with the World Gold Council Thursday.
Demand has been robust in the two nations so far in 2013, with the WGC’s quarterly trends report Thursday citing increased purchases of jewelry, coins and bars in the wake of a price fall as buyers sought to take advantage of lower prices.
For the second quarter, India’s gold demand jumped 71% year-on-year to 310 metric tons. Demand for China surged 85% year-on-year to 294.6 tons, the WGC said.
“It really does show the incredible performance of those two markets in Q2,” said Marcus Grubb, managing director for investment with the WGC. He spoke with Kitco News in conjunction with the release of the quarterly report.
The Gold Council hiked its forecasts for demand in these nations, currently looking for each to buy somewhere between 900 and 1,000 tons for the full year, Grubb said. This is an especially bullish forecast for China since its previous high was around 776 tons, whereas India has hit 1,000 before, the WGC official continued.
For the first half of the year, China purchased around 600 tons, up 45% from the first six months of 2012, Grubb said. India had purchases of 566 tons, a 48% increase. While China has consumed more so far this year, the second half tends to be stronger for India due to the Diwali festival season, Grubb continued.
“So we think it’s very difficult now to call between the two markets which will be biggest,” Grubb said.
Indian authorities implemented a number of measures aimed at curbing gold imports into the country in an effort to tackle a large current-account deficit. The import tax was hiked again Tuesday. Yet, the Grubb said he looks for strong demand anyway. He pointed out that even with prior attempts to limit imports, India’s demand is up sharply so far during the first half of 2013.
He said after the latest measure Tuesday, hiking the duty to 10%, the gold premium jumped to $57 an ounce in Mumbai, meaning the new rules simply meant higher prices for consumers.
Grubb later added, “We think demand will remain unaffected in India. We think the other corollary of that is you are going to see a bigger gray market this year, with probably a bit higher than 200 tons of gold coming in through unofficial channels by year-end.”
The data in the WGC report, compiled independently by the consultancy Thomson Reuters GFMS, show that India’s jewelry demand jumped to 188 tons in the second quarter from 124.6 in the same period a year ago. Bar and coin investment rose to 122 tons from 56.5.
For China, jewelry demand rose to 167.3 tons from 108.8. Bar and coin investment climbed to 127.3 tons from 50.1.