China overtakes India as top gold consumer

Consumers around the world bought record amounts of gold in 2013, led by demand in China and India, even as China emerged the world's biggest gold market, latest data released by the World Gold Council showed.

China imported 1,066 tonnes of the yellow metal in 2013 against the 975 tonnes India bought during the year, according to the World Gold Council's Gold Demand Trends report.

China's demand for physical gold, including coins and jewellery, soared 32 per cent during the year while India's consumption increased by a slower 13 per cent, mainly due to import restrictions aimed at narrowing the country's current-account deficit.

Import curbs, meanwhile, have led to a surge in gold smuggling into India and the WGC estimates around 200 tonnes of the metal have been smuggled into the country.

Global consumer demand for gold saw a 21 per cent increase in 2013 which contrasted with outflows of 881 tonnes from gold ETFs, resulting in a 15 per cent reduction in net gold demand in 2013 at 3,756 tonnes.

Annual global investment in bars and coins reached 1,654 tonnes, up from 1,289 tonnes in 2012, a rise of 28 per cent, and the highest figure since the World Gold Council's data series began in 1992.

For the full year, Chinese and Indian investment in gold bars and coins was up 38 per cent and 16 per cent, respectively. Although much smaller markets in terms of volume, in the US, bar and coin demand was up 26 per cent to 68 tonnes, and in Turkey it was up 113 per cent to 102 tonnes, demonstrating solid support on a global basis.

Demand for jewellery increased by 29 per cent from 519 tonnes to 669 tonnes in China, and by 11 per cent from 552 tonnes to 613 tonnes in India, and 2,209 tonnes globally, the highest figure seen since the onset of the financial crisis in 2008.

Marcus Grubb, managing director, investment strategy at the World Gold Council said, ''2013 has been a strong year for gold demand across sectors and geographies, with the exception of western ETF markets. Specifically, it was the year of the consumer. Although demand has continued its shift from West to East, the growing demand for gold bars, coins and jewellery is a global phenomenon.

''Taken together, the statistics demonstrate the resilience of the gold market and the unique nature of gold as an asset class, rebalancing to reflect the economic environment.''

Gurb expects China's lead over India as the world's top importer to be sustained.

China started liberalising gold trade 10 years after India, but, with a low stock, which is less than half of India's stock, there is more room for demand growth, according to Grub.

In western markets also consumer demand remained strong with the US, in particular, having a robust year in the jewellery, bar and coin sectors, WGC said.

Consumers remain key drivers in the demand for gold. Globally, consumers bought 3,864 tonnes of gold last year, 21 per cent more than in 2012. Jewellery demand for the year rose 17 per cent to 2,209 tonnes, while investment in bars and coins was up 28 per cent at 1,654 tonnes, WCG added.