Gold demand vs India and China

Based on their cultures and traditions of thousands of years, both China and India are great consumers of gold in the form of jewelry. Their current economic growth reflected in the increasing incomes is supporting this traditional gold demand and consumption.

The gold jewelry demand, for example, reached 407.7 tons worldwide, which means a 43% rise, with 25% of consumption just in India.

On the other hand, Chinese investment in gold products made the demand to rise by 44%, the investors perceiving gold as a more reliable asset than currency, due to the higher and higher interest rates charged by banks. In this context, as figures have already shown, China has already become a greater gold consumer than India.

China's national gold demand accounted for 18.7% of the global demand, while India's national gold demand accounted just for 12.1% of the global demand in the first two quarters of 2009.

In these conditions, the World Gold Council expects that the gold demand will continue to increase not only in the form of jewelry demand, which was equivalent to 57% of the total demand, but also due to the intense purchasing of gold bullion and coins, the investment demand being equivalent to an impressive 31% of the total demand.

Considering these figures, it is not difficult to notice the impact of this huge demand on gold prices, and it seems reasonable to expect the latter to rise continuously in the future. As such, both gold jewelry and gold bars and coins purchasers opt for buying gold now rather than waiting for disadvantageous higher prices.

The gold price seems to stay ahead of the gold demand, rising by 28%, while the latter rose only by 12% during the quarter. Both in India and China, gold prices are on the rise, in the latter, for instance reaching a new record of 8,480 Yuan per ounce.

While it is true that China bases its consumption mostly on its own production, its huge national demand might soon change this situation, such a change being expected to impact greatly on global gold prices.

India, which, as a jewelry consumer accounts for 25% of the gold consumption and, as a retail investor, for 19% of the total demand, has witnessed a rise in its gold price: 56,032 rupees per ounce, an all-year high. In this context, there is no wonder that the gold price reached the highest level for a quarter, globally.

In these conditions, it is safe to say that the greater demand will always mean higher prices, and the biggest gold consumers will play a crucial role in driving gold prices ever higher.

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