SHANGHAI – Chinese demand for gold bars and coins as private investments could push bullion imports above 400 tons in 2011, the leading global consultancy GFMS said on Friday.
Increased appetite for silver investment products too, combined with a forecast 16 percent annual growth in industrial demand, means China’s total silver consumption could outstrip domestic supply this year, said Philip Kalpwijk, executive chairman of GFMS.
“There is a widening demand for silver as an investment in China because of its lower entry point. It is also being increasingly recognized as an physical investment asset, which will support demand,” Kalpwijk told a conference in Shanghai.
The Chinese government does not publish official statistics on gold imports but the World Gold Council said the country produced 340 tons in 2010.
Last year, total consumption was about 700 tons, leaving a gap of around 300 tons made up either by imports or sales of existing stocks.
The surge in imports, which jumped fivefold last year, has turned China, already the largest bullion miner, into a major overseas buyer. GFMS forecasts imply that imports will continue to grow at a robust pace despite high gold prices.
The explosive demand has been stoked by concerns about inflation and poor returns in the stocks and property sectors. It also been aided by Beijing’s encouragement of retail consumption, such as expanding the number of banks allowed to import bullion.
GFMS said China’s investment demand for gold could hit 300 tons this year, up from 200 tons in 2009. Investment demand for silver stood at around 260 million tons in 2010, the group said.
China National Gold Group Corp predicted that China’s bullion output could reach 400 tons by 2014, a gain of nearly 19 percent from 2010. Consumption was set to grow by nearly a quarter to 700 tons, implying a supply shortfall of about 300 tons in three years.
Demand from China, along with inflation concerns amid a weak dollar, has pushed gold prices to a series of record highs.
Bullion struck a record above $1,575 in early May. Silver touched a record at $49.51 in late April before falling sharply on a broad sell-off in commodities and after exchange operators in Shanghai and New York raised the amount of money required to trade.
Gold’s decade-long price rally could take the metal above $1,600 an ounce by the end of the year, GFMS said.
The investment frenzy in China has also led to booming trading volumes in the spot and forward markets on the Shanghai Gold Exchange (SGE), said the exchange’s president Wang Zhe.
Total gold traded on the exchange rose 28.5 percent from a year ago to 6,051.5 tons in 2010, while the total turnover jumped 57 percent. The trading volume for silver was 73,615 tons in 2010, a meteoric 353 percent rise from a year ago, Wang told a conference on Thursday.
The SGE, China’s only specialized precious metals exchange, started a trial of over-the-counter trading in April and is studying ways of establishing a platform to provide open gold lease rates in China.
China National Gold Group’s President Sun Zhaoxue said Beijing’s move to consolidate the gold-mining sector, improve technology and encourage exploration at depths exceeding 1,000 metres would combine to boost underground reserves and output.
China’s gold output in the first three months of 2011 totaled 73.4 tons, up 4.6 pct from the same period in 2010, the Ministry of Industry and Information Technology said.