China gold demand drops 18pc in first quarter on fewer bar sales

The mainland's demand for gold fell 18 per cent in the first quarter of the year as investors bought fewer bars and coins, offsetting record interest in jewellery, the World Gold Council said.

Purchases declined to 263.2 tonnes, the London-based council said yesterday. While jewellery consumption rose 10 per cent, demand for bars and coins sank 55 per cent, accounting for about 40 per cent of the global decrease.

Lower demand from the mainland, which surpassed India as the world's largest gold consumer last year, may weigh on the price of the precious metal, which has increased 7.7 per cent this year. As holdings in bullion-backed exchange-traded funds contract to the least since 2009, Goldman Sachs expects prices to extend declines after a 28 per cent drop last year.

"The seasonal impact of Chinese New Year being closely followed by Valentine's Day, and the strong gold buying and gifting traditions associated with those two occasions drove jewellery consumption to a record first quarter volume," the council said. "Investment demand in China followed a similar pattern to that of jewellery: holding up well in the approach to Chinese New Year before dropping away fairly sharply."

Gold for immediate delivery was trading at US$1,294.06 an ounce in Hong Kong late yesterday morning, from US$1,292.97 on Monday. Bullion prices rose 6.9 per cent in the first quarter, while prices on the Shanghai Gold Exchange climbed 8.8 per cent.

The mainland's demand for bars and coins dropped to 60 tonnes in the first quarter from 134.6 tonnes from a year earlier, while jewellery consumption climbed to 203.2 tonnes from 185.2 tonnes, the council said.