China expected to surpass India as top gold consumer

China is set to surpass India as the world's top gold consumer this year, the World Gold Council (WGC) predicted Thursday, a trend underlining the strength of China's presence in the gold market despite signs of a moderate economic slowdown.

The demand for gold in China, the world's largest producer, rose 20 percent to 769.8 tons last year, driven by surging demand for jewelry and investment, while consumption in India, the world's largest consumer, tumbled 7 percent to 933.4 tons as a result of volatile gold prices and a weak rupee, the WGC said in a report e-mailed to the Global Times yesterday.

"Looking particularly at Asia, there was a major boost to the overall figures from the increase in Chinese demand, which is a trend that we see continuing over the next year. It is likely that China will emerge as the largest gold market in the world for the first time in 2012," Marcus Grubb, managing director for Investment at the WGC, said in a statement.

The WGC's prediction came after a surge in gold demand in the Chinese mainland market last year, with imports from Hong Kong, a proxy for its import demand, more than tripling to 428 tons from the 2010 level.

In the fourth quarter of last year, China was already the largest consumer of gold, with demand reaching 190.9 tons of gold, compared with India's 173.0 tons, the WGC said.

The trend of surging demand in the market will continue till the end of this year despite signs of growth slowdown, according to the report.

"China, with its large reserve base, adjustable exchange rate and political decisiveness, may be better positioned to tackle a slowdown posed by falling exports and the policy tightening pursued during most of 2011," the WGC said.

"The surge in demand was caused by concerns of high inflation, the country's monetary policy tightening, as well as gloomy global economic prospects, driving investors away from property and stock markets to other investment channels to protect their wealth," Zhang Yongtao, vice president of China Gold Association (CGA), told the Global Times.