China may overtake India in gold demand

China may overtake India to become the world’s top gold consumer this year, the World Gold Council said, as the nation became the first of the major economies to rebound from the global recession.

Jewellery demand in China expanded in the first quarter while dropping in India, Marcus Grubb, a managing director at the London-based council, said. Chinese gold demand will keep rising, he said.

China’s economy grew 7.9 per cent in the second quarter after a 4 trillion yuan ($586 billion) stimulus package spurred record lending and consumption.

India’s gold purchases slumped 54 per cent in the six months ended June after a decline in the rupee pushed up the cost of owning bullion, cooling demand from housewives and jewelers, the Bombay Bullion Association said.

“There is a possibility that China might overtake India as the world’s largest gold consumer this year,” Hou Huimin, deputy head of the China Gold Association, said. “India’s gold consumption is reportedly dropping this year due to the financial crisis.”

Total demand from India in the first quarter fell 83 per cent to 17.7 tonnes, from 107.2 tonnes a year earlier, according to figures from the World Gold Council. Purchases in China rose 1.8 per cent to 105.2 tonnes from 103.3 tonnes.

Total Chinese demand for gold was six times that of India in the first quarter, the council said in May.