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World gold demand slides in Q3 as China economy bites - WGC
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Monday, 19 Nov 2012
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Reuters reported that Global gold demand dropped 11% in the 3 months to September from record levels seen in the same period last year, dampened mainly by fading Chinese fervor as its economy slowed with stronger Indian demand stemming a larger fall.

The World Gold Council said that Chinese gold consumption fell 8% in the July to September period to 176.8 tonnes with both jewellery and investment demand hurt by a slowing economic growth.

Data last month showed China's economy slowed for a seventh straight quarter in the July to September period. Chinese bar and coin investment dropped 12% to 53 tonnes while jewellery buying fell 5% to 123.8 tonnes.

Mr Marcus Grubb MD of WGC's managing director of investment research said that "The fall in Chinese demand coincides with weaker economic numbers in China in Q3. There is some evidence that the economic situation is stabilizing in China and recovery is starting it's possible that the stimulus measures have worked and the economy has bottomed out. If that's true, we won't see a repeat of this Chinese weakness in the fourth quarter."

China is second to India as the world's biggest gold consumer. Indian demand rose in the last quarter by 9% to 223.1 tonnes, reversing the trend of the previous three quarters, with pent up consumer demand lifting the market. First half buying was dented by jewellers' strikes, a hike in import duty and a dearth of auspicious days for weddings.

Mr Grubb said that "Finally we're starting to see the Indian market come back. And the anecdotal evidence is good looking forward to fourth quarter demand premiums are high again in the Mumbai market, and the strength of the rupee has meant you have seen rupee prices moderate somewhat."

He said that "European investment is lower than it's been for some time in the retail market. You're not seeing that insurance demand and safe asset demand from Germany and Switzerland that we were seeing last year."

Central banks continued to diversify their reserves into gold in the Q3 but buying was down by nearly a third YoY. Official sector demand reached 97.6 tonnes last quarter down from 140.8 tonnes a year before.

Mr Grubb said that in the full year demand was likely to outstrip 2011's 47 year high. The quarter was bad, but we're still ahead of where we were last year which was a record going back to 1964. If we get another 100 tonnes or so in the Q4 you're talking a figure for the full year that's higher than 2011.

Source - Reuters


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