Warning to goldsmiths, jewelers and lovers of gold rings, earrings or necklaces: despite the drop in prices in 2013, the demand for the yellow metal will remain high. Therefore, there will be (presumably) no slides in the price of gold. How can we be sure? A report published by the World Gold Council points the finger at China. According to analysts, private sector demand for gold in the large Asian country is set to increase from the current level of 1,132 tonnes per year to 1,350. In 2013, China became the world’s largest gold market and in 2014, the trend is likely to be consolidated. Despite the slowdown in the economy, gold purchases will continue in the coming years. By 2020, the middle class in China will grow by more than 60%, by about 200 million people, for a total of 500 million. They are all potential buyers of a gold jewel. Furthermore, the emerging class will also be encouraged to buy gold as an investment. According to Albert Cheng, director general for the Far East at the World Gold Council, “since the liberalization of the gold market began in the late 1990s and the subsequent supply of gold bars by local commercial banks from 2004 onwards, we have seen astonishing increases in consumer demand across the country. The cultural affinity for gold is deep in China: when this is combined with an increasingly wealthy population there is significant room for the market to grow even further. China is now at the center of the global gold ecosystem”.
Chinese savings levels remain high: around $7.5 trillion are deposited in bank accounts, while only the equivalent of $300 billion has been transformed into jewelry or gold bars. But the Chinese are likely to increase their purchases: gold is seen as a safe haven, also attractive due to rising house prices and the lack of alternative savings options.
It’s no surprise then that China has become the world’s number one jewelry market, nearly tripling in size over the past decade, now accounting for 30 percent of global jewelry demand. And estimates suggest demand will continue to grow to 780 tonnes by 2017. There are now more than 100,000 retail outlets offering 24k gold and thousands of manufacturers nationwide. Consumer confidence in gold is strong: even though 40 percent of jewelry consumption is for weddings, around 80 percent of consumers plan to maintain or increase their spending on 24k gold jewelry over the next 12 months. They believe gold will retain its value in the long term and expect to have higher disposable income levels.
