China to replace India as No.1 gold consumer

According to The World Gold council fore cast , China  is set to become the world's biggest gold consumer replacing India by a convincing margin. Thanks to the strict import rules introduced by New Delhi bite.

 

The outlook has been cut by the Industry body for Indian demand in 2013 to around 900 tonnes from 1000 tonnes as predicted previously while forecast for China remains  unchanged at 1000 tonnes. 

 

Fearing that US Federal Reserve would cut its economic stimulus, plummeting  Indian demand could further pressure global prices that have dropped by 24 % this year.  

"The administrative measures that the Indian government has imposed on the market have proven to be quite effective and imports have slowed down," Albert Cheng, WGC's managing director for the Far East said.

 

"It would be difficult to get to 1,000 tonnes," he said, adding that demand would not go far beyond the 864 tonnes recorded last year.

 

"If not for administrative measures, India would have seen growth like China."

 

According to the WGC's third-quarter report, demand from India so far this year has reached 714.7 tonnes, lower than mainland China's 779.6 tonnes. Chinese demand in the first three quarters of the year is already above all of 2012.

 

India, grappling with a high trade deficit and a weak rupee, imposed a series of measures this year to crimp demand for the precious metal — the second most expensive item on its import bill after oil.

 

It introduced a record 10% duty on gold imports and tied the volume of imports to exports, making it more difficult and expensive for gold to be sold to domestic markets. Imports plunged to 24 tonnes in October from a record 162 tonnes in May.

 

But the WGC warned that gold was finding its way into India through unofficial channels. It did not give an estimate on supply through smuggling.

 

"Gold entering the country unofficially through India's porous borders helped to meet pent-up local demand, together with an influx of recycled gold that was drawn out by higher prices and promotions offered by retailers," the WGC said in its quarterly report.

 

"It is likely that unofficial gold will continue to find its way into the country to satisfy demand."

 

Local premiums hit a record $130 an ounce earlier this month as supplies were scarce in the build up to the peak gold buying season of Dhanteras and Diwali. However, demand failed to match last year's appetite and premiums have since eased.

 

"This quarter there wasn't runaway demand as we had estimated," said Somasundaram PR, WGC's managing director for India, commenting on fourth-quarter appetite. "It is going to be lower than last year."