Rising inflation to stir up gold demand across Asia: HSBC

NEW DELHI (Scrap Monster):  The demand for gold across Asia will continue to keep expanding as inflation at relatively higher levels are likely to spur investment purchases, observed HSBC Holdings Plc. With inflation still at elevated levels and interest rates remaining subdued, the financial services firm expects the appetite for gold in Asian countries to remain buoyant.

Over the decade, the demand for jewelry, bars and coins in Asia-especially India, Greater China, Indonesia and Vietnam increased to 60% of the world demand as compared with 35% in 2004.According to World Gold Council data, the demand for gold has more than doubled in India in the past five years. Gold consumption in China has soared almost 350% during the period.

Gold prices have plunged by 31% from their record high in 2011.During this year alone, the gold prices have lost nearly 21%. The slump in prices has only spurred gold buying in the region. HSBC forecasts the consumer prices in China to rise by 2.7% in 2014 and by 3.1% in 2015. Inflation in India is expected to remain at almost the same levels. HSBC predicts the country’s inflation at 7.7% in 2014 and 7.9% in 2015.

Many Asian countries have few tools to protect their saving against rising prices. With inflation at high levels, gold naturally is bound to become the preferred investment choice among Asian customers.