Mainland China Now Top Gold Consuming Nation

It finally happened: the first quarter of this year saw mainland China take away the top spot from India. According to the World Gold Council's tally, demand in the former nation almost doubled to 90.9 tonnes. That jump outpaced demand in the latter nation, which rose by a more modest percentage to 85.6 tonnes. Only five years ago, mainland China accounted for only 9% of total demand while India accounted for 61%.

"I think people will be surprised by the strength in the Chinese demand, but we think this is a trend that is set to continue," said Eily Ong, an investment research manager at the gold council....

"In March 2010, we predicted that gold demand in China would double by 2020; however, we believe that this doubling may in fact be achieved sooner," said Albert Cheng, the World Gold Council 's managing director for the Far East. "Increasing prosperity in the world's most populous country coupled with their high affinity for gold will serve to drive demand in the long term."

Part of the reason for the mainland Chinese demand explosion is more wealth in the country, but another cause is high inflation: mainland Chinese buyers are using gold to protect themselves from it. Also, more outlets are selling gold now that the government is encouraging the purchase of the metal; those new depots require starting stock. Mainland China is the world's biggest gold producing nation, and has been for some time, but its production is well below its demand.