Surge in demand for gold seen short-lived
The mainland's gold consumption is expected to climb to more than 1,000 tonnes this year, although the trend is not sustainable and could drop from next year, the country's biggest gold producer said yesterday.
Meanwhile, output this year on the mainland, the world's top producer, was set to climb about 7 per cent to a record 430 tonnes, said Du Haiqing, a deputy general manager at China Gold.
Gold demand from China surged more than 50 per cent in the first six months of this year as sliding prices of the precious metal lured buyers, reinforcing expectations that it would overtake India as the top consumer this year.
Consumption last year was 832.18 tonnes, according to data from the China Gold Association.
Demand growth has dramatically outpaced production, causing imports from Hong Kong to surge and hover at more than 100 tonnes for five consecutive months to September.
But Du said this year's consumption was "abnormal" as a sharp drop in prices in April had sparked a buying frenzy.
"Consumption will gradually cool down," he said. "The current consumption level of over 1,000 tonnes will not be sustained and will fall to normal levels as consumers become more rational."
The mainland's net gold imports from Hong Kong in the first nine months of the year totalled about 855 tonnes. The high import figure, which is well ahead of a supply deficit of at least 570 tonnes, could be due to purchases by the central bank, analysts said.
The People's Bank of China planned to increase the number of firms allowed to import and export gold and ease restrictions on individual buyers, a draft policy document said.
Du also called on Beijing to review its gold mine licensing system, where lax rules have allowed prospectors to buy and speculate on sites without developing the resources. This has driven up costs for producers as they are forced to buy mining rights from private investors at an inflated price.