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BRUSSELS (Scrap Monster): China is poised to overtake India as the world’s largest consumer of gold, said Deutsche Bank in a special report.

“We would argue that China’s long-term strategy on trade and finance likely includes a definitive position on gold. Given the possibility that China’s could be the world’s largest economy in the second half of the century we expect that at some point over the long-term the RMB may be in a position to challenge the USD as the world’s reserve currency,” the German bank added.

“If this is envisioned by the PBOC we would expect that in preparation for such an event and to support reserve currency legitimacy in the eyes of its trading partners, the country may see a stock-pile of gold rivalling that of the US as a requirement. On this basis we would expect that China could be quietly building its gold reserves,” they added.

According to World Gold Council, China’s demand for gold stood at 417 tons I the first half of this year surpassing India’s 383.2 tons in the same period.

China is a much bigger economy than India and their demand, especially for jewellery and investment, is growing. The country’s own supply will not be able to meet this demand growth and the imports will rise. While observing the present trends, WGC is hoping that China will beat India as the largest importer of gold this year.

In the first quarter of this year, China’s gold import was at close to 136 tons, which was below India's level of 209 tons recorded in the March quarter.

During the second quarter of this year, China’s jewellery and investment demand slipped 7% to 144.9 tons from 156.6 tons in the corresponding quarter of 2011.