Last Updated : 04 August 2009 at 15:30 IST

China's gold production rising at 8% annually

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MUMBAI (Commodity Online): It is an interesting story in gold as far the yellow metal purchases and imports are concerned by the world's two largest gold-consuming countries--China and India.

So far, for many years, India has been the undisputed leader in gold purchases and imports. Every year, India consumes around 650 tonnes of gold. China's gold production has been rising around 8% every year.

China is fast overtaking India in gold consumption. According to the World Gold Council (WGC), China is all set to outsmart India to become the world's top gold consumer this year, as the nation became the first of the major economies to rebound from the global recession.

Mr Marcus Grubb, managind director, WGC, said at a conference in Hong Kong that "Jewelry demand in China expanded in the Q1 while dropping in India. Chinese gold demand will keep rising".

Mr Grubb said that "Growing demand in China would not necessarily boost imports of the metal as rising production may be able to satisfy additional consumption. China's production of gold has risen at rate of 7% to 8% annually over the past 5 to 6 years. It depends if the demand is rising faster than production. At the moment, they are roughly in balance".

The Bombay Bullion Association said that China's economy grew 7.9% in the Q2 after a CNY 4 trillion stimulus package spurred record lending and consumption. India's gold purchases slumped 54% in the 6 months ended June after a decline in the rupee pushed up the cost of owning bullion, cooling demand from housewives and jewelers.

According to Council data, which cited statistics from GFMS Limited, China consumed nearly 400 tonnes of gold in 2008, while demand in India was more than 650 tonnes. Global demand rose 3.8% to 3,658.6 tonnes or USD 101.8 billion.

The Ministry of Industry and Information Technology said recently that China will seek to boost gold output to 290 tonnes this year from 282 tonnes in 2008.

The Bombay Bullion Association said that gold imports by India in the 6 months ended June 30th plunged to 63.8 tonnes from 139 tonnes a year earlier. It said that imports may fall further after the government doubled the import duty this month. Mr Harmesh Arora, vice president, Indian association, said, "India's gold demand as reflected in imports have fallen drastically in the first 6 months". He said that "There are still no signs of demand picking up as global prices are moving higher".