There’s a major duel going on right now in the gold market over which country can claim the title as being the top consumer of the world’s most prized precious metal.
In one corner is India, the unrivaled champion of gold consumption for decades. In the other corner sits China, who hasn’t been in the ring long but has already proven themselves to be serious heavyweights. In fact, China overtook India as the world’s top consumer of physical gold in 2013, as Chinese demand for gold coins, bars and jewelry rocketed by 32% to 1,066 metric tons.
But the latest data indicates that India has once again taken the lead due to lower prices, the new administration of Prime Minister Modi and an “encouraging backdrop” for gold demand, the WGC said in its third-quarter report.
However, it is known that Indian consumers tend to be wary of buying gold while prices are fluctuating, and news from China once again looks bullish, so there’s no telling how long they will hold the title this time.
India’s Gold Outlook
The leading political party in India’s government—the world’s largest democracy by population—has instilled some uncertainty in the usually robust gold buying season, when Indian consumers purchase gold as gifts for weddings and religious festivals.
In the past year, under Modi’s leadership, the government has introduced a new set of strict tariffs and regulations on gold imports in an effort to recover from a recent currency crises that crippled the value of the rupee. This was enough to give China an edge last year, but the general sentiment in India appears to be improving, or so Alistair Hewitt, head of market intelligence at the WGC, believes.
“We see really positive momentum in the Indian market – Modi has engendered a sense of optimism about economic growth,” Hewitt told Financial Times. “Jewelry demand is looking good and that will feed through to the fundamentals and continue to support the global gold market.”
China: The Rising Gold Glutton
Meanwhile, in China, after a record-shattering buying season in 2013, gold demand this year slid by more than 20% in the first 9 months. It is believed that low gold prices made Chinese consumers wary of the market.
China is hardly down for the count though. In fact, a surprise interest rate cut by the People’s Bank of China on November 21 has revived hopes that the extra spending money could jolt demand for physical bullion in one of the world’s biggest gold consumers.
“By unleashing greater spending power amongst the Chinese public, there is more potential for more gold demand and a response in the price longer-term,” Mitsubishi Corp strategist Jonathan Butler told Reuters.
With both India and China poised to increase their gold demand in the coming year, it is certainly a metal you will want to get a hold of.
If you are looking to buy, check out our inventory of gold and other precious metals by visiting the main Provident Metals site today.
