Upsurge of purchasing gold cooling down in China (2)

Gold demand to increase in second half

China ranks sixth in the world with a total gold reserve of 1,054.1 tons. Although China"s gold demand has grown slower than last year, the WGC still forecasts the 2012 growth rate of the country"s gold demand at 10 percent.

Zhang predicts an increase in gold demand in the second half, but Chen believes that investors are cashing in amid the challenging economic climate, so there will be a temporary decline in gold demand.

However, history proves that gold can always serve as a safe haven for investors when a tail risk event such as the 1998 financial tsunami occurs.

Experts noted that gold demand in China will enter the traditional peak season in late August with a series of major Chinese festivals around the corner. Gold jewelry manufacturers will increase purchases of physical gold, which will drive gold prices further up.

In addition to festivals, favorable fundamentals for the gold after August will also help gold prices resume their rally. Furthermore, the increase in inflation expectations amid rising global food prices will rekindle the people"s enthusiasm for gold investment, experts predicted.

Read the Chinese version at: 中国人购金热开始退烧, Source: People's Daily Overseas Edition, Author: Liang Jie

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