China is likely to overtake India in terms of gold consumption this year because its economy is fast recovering from the global financial crisis.
According to the World Gold Council, China is likely to overtake India to emerge as the top gold consumer in the world this year on account of fast recovery of its economy from the global recession, as reported by Bloomberg.
The World Gold Council released figures for the total gold demand stemmed from India in the first quarter of 2009. The demand for gold in India declined 83% to 17.7 Metric Tons while China observed an increase of 1.8% to 105.2 Tons. The Council further revealed that the overall demand for gold in China was six times higher than India during the first quarter of 2009.
The effects of a 4 Trillion Yuan ($586 Billion) stimulus package began to see in the second quarter when China's economy registered growth of 7.9%, spurring record lending and consumption. The Bombay Bullion Association said that gold purchases by India slumped 54% in the six months period ended June 2009 owing to low demand from jewelers and housewives.
It is expected that China will overtake India to become the world's largest consumer of gold in 2009. The prime reason for downfall in gold imports is its high prices in the international market.
Investors have shown great confidence in gold because it is more secure investment and reduces the possibilities of deflation. Although investment in gold seems very lucrative, several investors have been struggling to pour money in this segment after they have lost huge amount of money in commodities and equity market.
Another main factor for tumbling import of gold in India is flooding of scrap gold in the market as people are increasingly selling their gold. In fact, this is the biggest downfall in gold import in the past few years.
On the other hand, consumption of gold by China is growing and this year's will certainly be more than previous year, said market experts.
According to a Research Analyst at RNCOS, "As the volatility and uncertainty in gold prices have led to steep decline in India's gold consumption, people are restraining from making new purchases. However, China is most likely to overtake India in terms of consumption if the current situation prevails."
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