March 10 (Bloomberg) -- The China Gold Association said demand in the Asian nation, the world’s largest consumer, may decline 17 percent this quarter from a year earlier after a 2013 surge in purchases of bars and jewelry.
Demand may drop to 250 metric tons from 300 tons, Zhang Yongtao, vice chairman of the Beijing-based group, said in an interview March 7 in New York. Usage surged 41 percent to 1,176.4 tons in 2013 from the year before, the group said last month.
Buyers who snapped up bullion in 2013, during the biggest price slump in more than three decades, may be deterred by this year’s rebound in prices, which are off to the best start since 2008. Gold has risen 11 percent since December as faltering global growth and tension in Ukraine boosted the metal’s appeal as a haven. The drop in sales may be brief as prices stabilize and buyers return for holiday purchases, Zhang said.
“Last year was a peculiar year when we saw a big fall in prices,” Zhang said. “People bought a lot of gold, and I think demand will start climbing again once the festive and marriage season begin later this year.”
The association expects annual demand will rise to about 1,176 tons. Production in 2014 will match last year’s output of 428.16 tons, Zhang said.
“China’s gold consumption this year will probably be sustained above 1,000 tons as long as the economy here will grow at 7 percent,” Albert Cheng, the World Gold Council’s managing director for the Far East, said last month from Hong Kong. Cheng pointed to wealth accumulation among China’s growing middle class.
China’s economy will probably expand 7.5 percent this year, the slowest since 1990, according to a Bloomberg survey of economists.
On March 7, gold futures for April delivery dropped 1 percent to settle at $1,338.20 an ounce on the Comex in New York. The price fell 28 percent in New York last year after some investors lost faith in the precious metal as a store of value amid a rally in equities and low inflation.
“Gold has found a floor,” Zhang said. “Companies will start lowering production if prices fall further as the cost of production at many companies is around $1,100-$1,200.”
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