By Sreekumar Raghavan
MUMBAI (Commodity Online): India, traditionally , the largest consumer of gold, witnessed a significant drop in demand and consumption in 2011 but China, the largest producer of the yellow metal, witnessed a stunning surge in demand.
The reason for the spike in Chinese imports in recent months, traders say, is that throughout the supply chain the Chinese gold industry was aggressively building inventory ahead of Lunar New Year, after experience in 2011 when the country ran short, according to an assessment by Mr Prithviraj Kothari, Director, Riddi Siddhi Bullions Ltd (RSBL).
In an interview to Commodity Online, Mr Kothari said that the effect of building of up China gold inventory was stunning. “The 189 tonnes of imports in October and November compares with total imports for the whole of 2009 of just 45 tonnes.”
Taking into account China gold import of 490 tonnes,domestic production of 360.96 tonnes, the full year Chinese demand in 2011 was atleast 891 tonnes as against 868 tonnes in India, Prithviraj Kothari said.
“Indian demand, on the other hand, collapsed in the fourth quarter (2011) as a slide in the value of the rupee made gold much more expensive for Indian buyers, already wounded by the slowing domestic economy.”
Indian demand for gold is expected to fall even as wedding season has commenced as India government had increased the import duty on gold to 2% of value from the earlier flat rate of Rs 300 per 10 grams and that of silver to 6% of value from Rs 1500 rupees per kg, according to Prithviraj Kothari. On Wednesday, India Government had raised the base import price for gold by 5.7 percent to $556 per 10 grams and that for silver by nearly 12 percent to $1067 per kg.to prevent underinvoicing.
