Although suggested earlier this year, China is projected to overtake India as the largest gold importer by almost 50 tonnes, according to a statement from the World Gold Council (GGC). An Economic Times report from early February said India had a seven per cent fall to 933.4 tonnes in 2011, while demand from China increased by 20 per cent to 769.8 tonnes in the same period. A report this month shows demand in gold picking up in India due to festivities (Diwali/Dhanteras) and late weddings while China sees rising demand due to stronger economic activity in Q4.
A representative from the WGC went on to report that,
Gold is beginning to re-establish itself as part of the fabric of the financial system. In the medium term, the quantitative easing initiatives in the West and the continuing growth story in the East, particularly in China and India coupled with the seasonally strong quarter coming up in Asia, are excellent indicators for further growth…
Amid continued global economic uncertainty and elections in the US and leadership change in China, it is clear that gold will continue to remain a vehicle for capital preservation, as evidenced by increase in global ETF investment in Q3, which jumped up 56 per cent and continued purchase by central banks which are the ultimate long-term investors
To better illustrate those two statements above, this chart showing the major sources of demand, make clear why gold has soared in recent years. Firstly, gold’s use in jewelry in India has dramatically grown since the 1991 reforms–more than doubling twice in twenty years–keeping up with the growing middle class. Then there’s China whose import and investment access in the precious metal has recently seen growth by double digits further stoking demand. In fact, 2013 will see China launch its first Gold ETF which some suspect will rival the world’s largest, the US’ SPDR Gold Trust.