Daily Management Review

China and India Will Support Growth of Gold


In the current year, consumers in China and India will increase demand for jewelry, coins and golden bars. The central banks of these countries are going to increase their purchases. Investment interest in gold is also growing. World Gold Council released its new report, from which it follows that the precious metal is becoming more attractive contrasted with simultaneous drop of oil and most stock markets.

Bullion Vault via flickr
Bullion Vault via flickr
Director of the Indian branch of the World Gold Council says that gold is the best protection tool when shares are falling. According to the institution, China and India are responsible for more than 50% of consumer demand. Gold showed the best start of the year for the last 36 years, while global stock markets fell by 10%.

In 2006, China bought a total of 260 tons of gold; India - 710 tons. Since then, China has overtaken its neighbor: the volume of purchases amounted to 984.5 tons last year. In China, the tangible part of liquidity in the stock market is generated by small and medium private investors. After the August devaluation and fall, many got disappointed in securities and in yuan in general. Shift to gold was the natural outcome. The demand immediately jumped by 25% only in the IV quarter of 2015.

India, despite its centuries-old tradition to gift gold jewelry, has increased the purchase not so much over the past 10 years: approximately 200 tons to 897.5 tons. According to the World Gold Council, the trend of smooth growth in demand in China and India will continue. At that, the latter may well try to get ahead.

Keep in mind that India is still largely an agricultural country. In 2015, rains were not in season, but farmers were still desperately waiting for them. Simply put, there were thing important more than gold, however India may catch up in a good harvest.

In general, demand from the world's central banks for the year grew by only 4 tons, to 588 tons. This corresponds to the optimistic forecast, as the base was only 400-500 tonnes. The World Gold Council said that the fundamental trend, set in 2010, remains in effect: banks of almost all over the world have turned from sellers to buyers. Investment demand grew substantially only in the IV quarter, but just 15% to 169.3 tons.