India Reclaims ‘Top Spot’ As # 1 Gold Consumer

February 4, 2015 Posted by admin

Posted by: : Paul EbelingPosted on: February 3, 2015

India Reclaims ‘Top Spot’ As # 1 Gold Consumer

India is back to being the #1 consumer of Gold, knocking China off the mark as the country that consumed the most bullion in the form of bars, coins and jewelry, in Y 2014.

The latest update of the annual study by GFMS of world bullion supply and demand found that sliding demand from China, which took the top Gold consumer mantle from India in Y 2011, is behind the shift.

The report by GFMS analysts showed that Chinese Gold demand dropped by over 33% to a 4-yr low of 866/tonnes, while scrap Gold supply rose to a new high of 182/tonnes.

Slower economic growth and a crackdown on corruption worked to cut Chinese jewelry demand to 608/tonnes, a full 33% below marks seen in Y 2013, the report said. Demand for bars fell 53% to 171/tonnes, a 5-yr low. An overhang of bullion in the Chinese market during the strong buying that occurred in Y 2013 was also a factor in keeping purchases subdued, according to GFMS.

Some analysts question whether the numbers in the GFMS report tell the whole story.

Data from the USGS shows 32% of US  exports in October went to Mainland China rather than through Hong Kong, the normal entry port for bullion destined for China. Other export flows, especially from Switzerland, are going direct to the Mainland. This suggest that Chinese consumption may be considerably higher than the GFMS report.

In India, jewelry demand in Y 2014 rose 14%, to a record 690/tonnes, placing the country ahead of China as the world’s top consumer of Gold jewelry.

That trend was noticed in November when Indians bought 39% more bullion in the run-up to Diwali and the start of the traditional wedding season.

A weakening of bullion prices in Rupee terms last year also boosted Gold demand in India, along with confidence in the new government led by Narendra Modi, according to a World Gold Council report released mid-November. The country has also saw a significant increase of Gold smuggling since the government ratcheted up restrictions and taxes on legitimate imports of the precious Yellow metal.

Other Key findings of the GFMS report:

  • The Gold market is currently in surplus, a situation that is expected to continue due to further liquidations from gold ETFs.
  • Gold mine production rose last year by 2%, to a record 3,109/tonnes. However GFMS does not anticipate production to increase much this year, with most large Gold mines now on stream.
  • Mining companies are returning to net hedging, which was around 42/tonnes in Y 2014.
  • GFMS sees the Gold price averaging 1,125 oz in Q-2, rising to 1,160 in 2-H.

Stay tuned…

HeffX-LTN

Paul Ebeling

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