China Gold Demand Seen Rising over 22%


"Within three years, demand may sharply outpace domestic production."

Reuters, Fayen Wong

Chinese gold demand could rise over 22% in the next three years and sharply outpace domestic production, the head of the country's largest state-owned gold miner China National Gold Group said on Thursday, signaling room for a strong ramp up in imports.

Gold production should reach 400 tons by 2014, a gain of nearly 19% from 2010, but consumption is set to grow by nearly a quarter to 700 tons, Sun Zhaoxue, president of the group, told reporters at the sidelines of a conference in Shanghai.

China produced 340 tons of gold in 2010 and investors locally bought 571.5 tons, according to official data, for a gap of 231.5 tons made up by either imports or sales of existing stocks.

The proportion of imports is not available because China doesn't regularly publish gold-trade figures and rarely comments on its reserves.

China has seen a spike in demand for gold and silver since late last year as investors looked to precious metals over stocks, property and savings.

India remains the world's largest gold buyer, but China is closing in and from a low base with room to grow quickly as income rise, Sun said, noting gold buying per capita stood at just 4 grams, much lower than other industrialized nations.

In April, Shanghai Gold Exchange, China's only specialty precious metals exchange, started a trial for over-the-counter trading, providing an easier tool for institutional clients to trade large quantities.

Sun said Beijing's move to consolidate the gold mining sector, improve technology and encourage exploration at depths exceeding 1,000 meters would boost the country's underground reserves and output over the coming years.

China's gold output in the first three months of 2011 totaled 73.4 tons, up 4.6% from the same months of 2010, the Ministry of Industry and Information Technology said.

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