China’s Gold Demand

Published on Author destefano

In 2013, China’s consumption of gold increase by 41 percent, exceeding 1,000 tons for the first time, and making China the worlds leading consumer of gold. The increase in gold consumption was spurred on by the expectations that U.S. Federal Reserve will scale back its monetary stimulus, causing the drop in gold prices; the first time gold prices have fallen in the past 13 years and the largest annual drop since 1981. Chinese increase in gold consumption has helped to limit the decline in gold price.

China’s demand for gold is expected to remain high, at least for the short-term, as price appears to hover around $1,200 an ounce. More and more Chinese are looking to invest in gold to help preserve their wealth because of the under performing equity market. The last time the government announced a change to its gold reserves was in 2009 and there is some speculation that Chinese government purchased gold to increased it gold reserves during 2013.

3 Responses to China’s Gold Demand

  1. Hey Bobby, great post. I was just wondering if you had any more information as to what gold is being used for in China? Or in other words, is gold being purchased purely for investment or has disposable income increased and people are purchasing gold jewelry?

  2. Gold has always been interesting to me in that it only has value because people think it’s rare. It seems to do well when there is uncertainty in the economy. Now that China’s economy doesn’t seem to be the powerhouse it has been for the last 10 years, gold may do really well in the near future.

  3. China historically used silver for its monetary base (though in the 11th century paper currency circulated!). Memories of that may have faded. My sense is that this is partly speculation, a side effect of financial repression, and that it is partly for jewelry. Now gold is used in semiconductors, but in layers only atoms thick so the total quantity used is quite small. But wedding banks and necklaces … there are (potentially) a lot of women who can sport in a population of 300+ million new members of the middle class! – cf. China as the world’s largest car market.