The Chinese are not eager to buy gold as the price of the metal stagnates and the country’s GDP grows at a slower pace, according to a report issued by the World Gold Council on Thursday.
In China, the amount of gold jewelry sold in the second quarter of 2012 decreased by 9 percent year on year to 93.8 metric tons, the report said.
The jewelry’s value meanwhile decreased at a gentler rate, going down 6 percent year on year to 30.7 billion yuan ($4.82 billion).
That was still 17 percent greater than the average quarterly value of 26.4 billion yuan that the sales showed during the past five years.
Also in the second quarter, 51.1 tons of gold were bought for investment purposes, an amount down 4 percent year on year.
The report said a lack of direction in gold prices was leading Chinese investors to think twice about buying the metal.
It said the Chinese often buy gold jewelry only when the price of such goods is showing a definite trend.
The second quarter of 2012 also saw the amount of gold purchased globally decrease by 7 percent year on year and by 10 percent from the previous quarter.
The lack of a clear price trend has prompted various responses from buyers around the world.
Amid the eurozone’s ongoing sovereign debt crisis, European investors, for one, have kept their conviction that they can safely preserve capital by putting it into gold, the report said.
And retail investors bought 77.6 tons of gold in the quarter, up 15 percent year on year.
That was 19 percent higher than the 65.2 tons they had bought every quarter on average in the past five years.
Also in the quarter, official institutions bought 157.5 tons of gold, a record amount and more than double what they had purchased in the same period a year ago.
Altogether, they were responsible for 16 percent of global gold purchases during the period.
Among the central banks that bolstered their holdings in the second quarter were the National Bank of Kazakhstan, and the central banks of the Philippines, Russia and Ukraine.
“Gold’s performance reflects the continuing challenging economic climate,” said Marcus Grubb, managing director of investment at the World Gold Council.
“A softness in India and China, who between them represent over 45 percent of the total second quarter jewelry and investment demand, accounts for much of the slowing of global gold demand.”.
However, through all the uncertainty, it is clear that gold’s fundamental properties as a vehicle for capital preservation and a source of liquidity continue to endure.
This is evident from the activity of central banks, the ultimate long term investors, which continue to increase their gold holdings to diversify reserves and protect against reliance on one or more foreign currencies.
If they rise (in the second half), obviously imports will go down,” he said.. The most active gold for October delivery on Indias Multi Commodity Exchange was up 0.23 percent at 30,073 rupees per 10 grams by 1010 GMT, not far from a record high of 30,428 rupees hit in June.. Investment demand, which lifted Indias gold imports in 2010 and 2011, is also affected by the perception that the upside is limited.. Investment demand accounted for 31 percent of total demand in the second quarter, down from 39 percent during the same period a year ago, WGC data showed.. A view that the Indian rupee, which determines the landed cost of imported gold, could rise against the dollar prompted many buyers to hold back on gold purchases, which they may execute in the second half. The rupee has lost over 5 percent so far in 2012.. LONDON (Reuters) – World shares were little changed on Thursday around 3 1/2 month highs, following hints that global growth engine China is eyeing new support for its economy, while signs of stabilisation in the United States buoyed the dollar.. European and global share markets have been riding high in recent weeks on hopes that new crisis plans being drawn up by the European Central Bank will put a floor under Spain and Italys troubles and prevent the euro from unravelling.. Overcoming the euro zones woes is seen as key to reversing the slowdown in the global economy. China warned on Thursday its trade outlook for the year was worsening, fingering the slide on the problems gripping Europe, its biggest customer.. Global shares were up 0.07 percent by mid morning, as rises in Asia just outweighed a more downbeat Europe, where indexes in London, Frankfurt, Paris and Madrid were slightly lower.. US stock index futures pointed to a slightly higher open on Wall Street, with futures for the S&P 500, the Dow Jones and the Nasdaq 100 rising 0.1 to 0.3 percent.. “One of the factors why European equity markets didnt follow the gains we saw in Asia is because the foreign direct investment data that came out of China were raising doubts over the economic boom there,” said Hans Redeker, head of global FX strategy at Morgan Stanley.. “Because the trade relationship with Europe is so developed, people fear the slower Chinese economy could be another factor undermining Europe.
“Even if China’s central bank does not have as much gold in reserve as other countries, individual investors and institutional investors in China may decide to increase their holdings of the metal to diversify their assets, said Chan. The second quarter of 2012 has been tough for both China’s gold market and the global gold market. Chan said Chinese investors apparently think that now is not the right time to buy more of the metal.”.
Katie Lennard is a business journalist based in Townsville, Australia. Katie has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Katie spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.
