American Bullion -- China Gold Demand May Double Within Decade- World Gold Council

Monday, March 29, 2010 at 06:00am

By Kyoungwha Kim

Gold consumption in China may double within the next 10 years, boosting prices as supplies fail to keep pace with booming demand from investors and the jewelry industry, the World Gold Council said.

“China has an insatiable appetite for gold, which looks likely to continue in an environment where domestic mine supply lags behind demand,” the council said in a report today.

 “An uptick in China purchases could bring an impetus back to the gold market,” said Hwang Il Doo, Seoul-based senior trader with KEB Futures Co, by phone today. “Given China’s currency reserves and rising wealth, the impact from their buying on prices will be powerful, although it may take time.”

Bullion prices have gained 21 percent in the past year as the global recession spurred demand for haven assets and the dollar weakened 5 percent against six major currencies. Gold for immediate delivery was little changed at $1,106.80 an ounce at 1:50 p.m. in Singapore.

“On the investment side, we see exponential growth,” Albert Cheng, the council’s managing director for the Far East, said in an interview in Beijing.

Banks Buying

Since last year, the world’s central banks have switched from selling to buying, Cheng said. Russia, India, China, Sri Lanka and Mauritius have all added to their reserves. “That is a big change,” he said.

Gold accounts for 1.6 percent of The People’s Bank of China’s $2.4 trillion total reserves, according to the council’s report. If the bank raised its gold holdings to the peak of 2.2 percent reached in the fourth quarter of 2002, the “incremental demand would amount to a further 400 tons at the current gold price,” the report said.