Chinese Seen Buying More Gold as Investors Seek Haven Assets

Updated on
Gold Rises to Three-Month Highs
  • Consumption grew 3.7% to 985.9 metric tons last year
  • Buying rose as investors sought the safety of bullion

China’s gold demand will keep expanding as investors seek safe assets and jewelry buying increases, the China Gold Association said.

Consumption in the country that vies with India as the world’s biggest user climbed 3.7 percent to 985.9 metric tons in 2015 from a year earlier, according to group data released on Wednesday. Demand rose as prices declined and investors allocated more wealth to the safety of bullion than to other financial assets, according to the association, which represents jewelers, refiners, banks, brokerages and miners.

Stock market turmoil, a weakening currency and the lowest global prices in almost six years have helped boost bullion buying in China. Swiss exports of gold to Hong Kong and the mainland jumped 87 percent in December from a month earlier, underscoring the flow of metal from west to east. Demand in Asia, which accounts for more than 60 percent of global use, is fundamentally strong and should continue, RBC Capital Markets said this week.

While consumption increased in 2015, it was well below the record 1,176.4 tons in 2013 when a 28 percent slump in prices spurred buying.

“Chinese people are treating gold more as a consumption item regardless of price so demand will continue to rise steadily,” said Jiang Shu, chief analyst at Shandong Gold Financial Holdings Capital Management Co., part of Shandong Gold Group, a mining company. “To repeat the buying frenzy in 2013 will be hard unless there’s a big move in prices,” he said by phone from Shanghai.

Coin Purchases

Gold jewelry demand gained 2.1 percent to 721.58 tons last year, while bar consumption added 4.8 percent to 173.08 tons and coin buying rose 78 percent to 22.8 tons, group data show. Industrial use increased 3.5 percent. Bar and coin sales climbed as some investors considered $1,100 an ounce a good investment, the group said. Bullion traded at $1,125 on Wednesday.

China’s net imports of gold from Hong Kong surged 67 percent from a month earlier in December to the highest level in more than two years as a weakening currency spurred haven demand. China’s central bank has also been buying gold monthly.

Gold output fell 0.4 percent to 450.05 tons in 2015 as some small, private producers halted operations, the group said. There are more than 700 gold mines in China and about half are suffering losses at current prices, it said.

— With assistance by Feiwen Rong, and Ranjeetha Pakiam

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