China is all set to emerge as the global leader in gold with the country easing its laws to help import of the yellow metal. This will have a major impact on the global bullion trade as Chinese investors turn to the open market to satisfy their hunger for the metal. Chinese gold demand is expected to show at least single digit percent growth this year at a time when high prices are curbing buying in other major markets like India. This is likely to mean the shortfall between Chinese supply and demand which stood at 144 tonnes last year increases even further.

Chinese demand is the key driving force for a number of key commodities such as copper but its status as the world s biggest gold producer as well as its second biggest consumer has meant its impact on the wider gold market has been muted. World physical gold demand particularly for jewelry has softened in recent years as the global economic slowdown and an investment driven rise in prices has put off buyers. Spot gold hit a record $1 300 an ounce on Monday. India which alone accounts for around a quarter of global demand has been particularly hard hit. Indian gold imports fell to their lowest level in more than a decade last year. Jewelry consumers in the United States and Europe have also been put off by a lack of consumer confidence that has affected a string of luxury goods.

But the strength of Chinese growth is reassuring the country s jewelry buyers. Demand for products like physically backed exchange traded funds remained more muted than in Western countries as Chinese buyers were more culturally acclimatized to buying physical gold in the form of bars or jewelry. Meanwhile after giving up some ground in the previous session gold stocks have shown a notable move back to the upside on Friday. Reflecting the strength in the gold sector the NYSE Arca Gold Bugs Index was up 1.2 percent on Friday.

Commodity Online sourced by HT Media Ltd

Source: http://www.indiainfoline.com/Markets/News/China-to-become-global-gold-leader/4950363803