Already this year, China will become the world's largest gold market, ahead of India, and in 2015 China will bypass the U.S. as a major consumer of diamonds - such an estimate was released by the London-based World Gold Council and the Antwerp World Diamond Centre.
According to experts, the growth of appetite for the yellow metal and diamonds in China is a consequence of the growing well-being of its population. In 2010, China had more than one million of millionaires. At the same time, the country’s middle class is continuing to accumulate wealth, according to Le Figaro.
China's consumption of diamonds, which is now estimated at $5 billion, is growing by 25% every year.
At this rate the Chinese will quickly bypass the Americans, which are now the main consumers of diamonds in the world.
This perspective is confirmed by the fact that last year De Beers’ sales of rough diamonds increased by 27%, particularly in China, India and the United States.
There is also a sharp rise in purchases of physical gold in the Chinese market. In 2010, sales rose 20% to 769.8 tonnes. In India they fell by 7% down to 933.4 tonnes.
According to the World Gold Council, gold sales in China will exceed India’s performance in the first half of 2012.
In China people buy gold not only as jewelry, they often make it a safe bet as an investment in an environment where inflation has reached 4% and where the government has limited the sale of real estate to combat market speculation.
In 2010, the amount of yellow metal purchased by investors in China jumped by 38% to 258.9 tonnes, while gold sales for jewelry needs went up by 13% to 510 tonnes.
Major Chinese banks display high interest towards gold having bought 439.7 tonnes last year, which is the highest level over the past five years.
Such a massive increase in demand for physical gold spurs the activity of market speculators. It is not by chance that billionaire Paul Paulson, whose hedge fund bears his name, said that "paper" gold may be the best way to protect against inflation.
As of the morning March 6, gold futures for April delivery at Comex fell by 0.3% to $1,699.4 per troy ounce.
According to analyst Helen Lau of UOB KayHian, gold prices are likely to consolidate at current levels.
In 2011, gold prices rose nearly 10%, and in February this year the metal fell by 1.7%.
The main factors supporting the value of gold, which experienced an eleven-year period of growth, the longest at least since 1920, is that this metal is seen by investors as a more reliable alternative to volatile currencies and corporate stock exposed to serious fluctuations amid the debt crisis in Europe and inflation gaining pace in various countries.
Alex Shishlo, Editor in Chief of the European Bureau, Rough&Polished
