How will India's reluctance to continue its gold buying spree affect the global bullion market? This is the question haunting many analysts across the globe as the world's numero uno consumer of gold, India, posts a huge fall in gold imports in 2009.
But, the ray of hope for the bullion market is that China has fast emerged as the leader in gold buying. In fact, in 2009 China has pipped India to the post in gold purchases.
Chinese New Year gold rush has already begun, and robust demand looks likely to continue through 2010. So, in the coming years, analysts will be watching China, instead of India, to make their decisions on investments in gold.
China's gold purchases have grown 10% from 2008's record in volume terms, rising 26% by value to equal $13.5 billion or more.
On recent trends, that would equate to more than 2% of China's famously massive household savings (up from 1% ten years ago) and account for almost one ounce in every eight sold worldwide.
According to GFMS, physical gold purchases by mainland Chinese households in 2009 was already running 19% ahead of India's private demand for Q1-Q3.
Given China's continued economic growth private gold consumption in Q4 most likely remained very robust. Whereas India's private gold off-take during Oct-December continued to shrink in the face of record-high prices.
Indian bank and wholesale dealers have reported below-market bids from their clients throughout the autumn. Imports were 54% lower from 2008's already disastrous finish.
Fourth-quarter Chinese consumption should be in the range of 116 tonnes. The running total to end-September was 315 tonnes. It is likely to finish full-year at 431-443 tonnes.
India's private demand, in contrast, ran 45% below 2008 levels during the first 9 months of the year, most notably depressed during Q1. Applying the 5-year average ratio of Q4 demand to Q1-Q3 figures (27% added to 264 tonnes), full-year private off-take would come in at 336 tonnes, the lowest total since at least 1991.
source - commodity online
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