Gold demand in China, the world’s largest consumer after India, may slow in the second half of this year after surging in April, said Zhang Bingnan, secretary-general of the China Gold Association.
“The kind of frenzied buying in late April and early May won’t be repeated,” Zhang said. Some of the jewelry demand earmarked for festivals or weddings later this year may have been brought forward to April and May after prices fell, he said.
Gold has declined 15 percent this year on concern the U.S. Federal Reserve may rein in stimulus that helped bullion cap a 12-year bull run in 2012 and as some investors lost faith in the metal as a store of value. Gold takes center stage in weddings in China in the form of jewelry and other gifts as a promise of a long and happy future together.
Chinese consumers rushed to buy jewelry, bars and coins as a 14 percent drop in prices in the two days through April 15 was seen as a buying opportunity, Zhang said in an interview from Shanghai on May 28. Uncertainty about whether gold will fall further this year may deter some investors in China from buying in the second half, he said.
Gold slid as much as 31 percent from a record in September 2011 through April 16, when it set a two-year low of $1,321.95 an ounce. The metal traded at $1,419.25 at 11:30 a.m. in Shanghai, while bullion of 99.99 percent purity on the Shanghai Gold Exchange traded at 282.35 yuan a gram ($1,430.60 an ounce).
Demand reached a record 294.3 metric tons in the three months to March, the gold council estimates. China’s purchases in 2013 should be better than last year, he said. The country consumed 776.1 tons in 2012, little changed from the previous year, according to the gold council.
China’s consumption reached 320.54 tons in the first quarter, with purchases of gold bars surging 49 percent to 120.39 tons and jewelry gaining 16 percent to 178.59 tons, according to the gold association.
About 6.6 million brides in China will receive gold in their weddings this year, and more than 80 percent of jewelry made from the precious metal in the nation is 24 karat, the council said.
“Although physical demand remains strong, in our opinion this can’t be relied on to provide the necessary push” for a rally in gold prices, Marc Ground, a commodity strategist at Standard Bank Plc., said in report May 29.
Investors cut 479.2 tons of the metal from exchange-traded products this year, according to data compiled by Bloomberg. Holdings in gold-backed ETPs have shrunk 18 percent this year after expanding every year since the first products was listed in 2003.
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