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Gold consumption likely to grow at a moderate pace in 2012: WGC

By Song Shengxia (Global Times)

08:28, July 11, 2012

Gold demand in China, the world's second largest gold consumer after India last year, is expected to grow only moderately this year due to the economic slowdown, the World Gold Council (WGC) said Tuesday, after revising its early forecast for a strong demand.

The US dollar is getting abnormally stronger given a weaker euro affected by Europe's debt crisis, driving investors away from purchasing gold. Chinese consumers usually restrain from buying when the prices are weak, Albert Cheng, Far East managing director of the WGC, told reporters during the launch of the Chinese language edition of Gold Survey 2012 Tuesday.

However, Cheng said he was still optimistic about China's gold-investment demand given the sluggish stock and property markets.

"China not only remained the largest gold producer in the world in the first quarter but also became the top gold jewelery market in the world for three consecutive quarters," he said.

Gold demand in China totaled 255.2 tons in the first quarter, up 10 percent from 2011, the WGC said in May.

The demand for physical gold in China may reach 900 tons in 2012, accounting for 20 percent of the global total, Philip Klapwijk, Global Head of Metals Analytics at Thomson Reuters GFMS, predicted at the launch event Tuesday.

China may overtake India as the world's largest gold jewelery consumer in 2012. So China's gold market will exert significant impact on the global market, he said.

The predictions came after China released consumer inflation data Monday which showed that the country's consumer price index (CPI), a major gauge of inflation, eased to 2.2 percent in June from 3.0 percent in May.

"The falling inflation rate will create more room for policy easing to bolster economic growth and would be positive for gold investment. Gold prices are expected to rebound in the second half of the year," Su Yanbo, a senior analyst with Beijing-based Baiinfo, an industry research agency, told the Global Times.

The People's Bank of China announced a surprise interest rate cut Thursday, in a move to propel growth.

Meanwhile data from the WGC on Monday showed that the Chinese mainland maintained its ranking as the sixth largest gold reserve holder with 1,054.1 tons of reserves, but the ratio of its gold reserves to foreign exchange reserves only accounted for 1.6 percent.

China remained the world's largest gold producer for the fifth year in a row in 2011, with the annual output rising by 5.9 percent to more than 360 tons, data from the China Gold Association (CGA) showed.

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