World Gold Council report 2014, China is the world’s largest gold market:
- increase from the current level of 1,132 tonnes(t)1 per year to at least 1,350t by 2017
- number one producer and consumer of gold since the market began liberalising in the late 1990s
- market will continue to expand, irrespective of short term blips in the economy.
By 2020 > China’s middle class will grow by over 60%, or 200m people, to a total of 500 million.(Total population of the USA is 319m)
Outlook for gold jewellery and investment demand in the next four years will remain strong.
Albert Cheng, Managing Director of the Far East at the World Gold Council said:
“Since liberalisation of the gold market began in the late 1990s and the subsequent offering of gold bullion products by local commercial banks from 2004, we have witnessed astonishing increases in demand for gold from consumers across the country. The cultural affinity for gold runs deep in China and when this is combined with an increasingly affluent population and a supportive government, there is significant room for the market to grow even further. The country is now at the centre of the global gold eco-system.”
“Whilst China faces important challenges as it seeks to sustain economic growth and liberalise its financial system, growth in personal incomes and the public’s pool of savings should support a medium term increase in the demand for gold, in both jewellery and investment.”
The key findings from the research include the following:
- China’s continuing urbanisation means that it now has 170 cities with more than one million inhabitants – within these cities, the middle classes currently number 300million and are set to grow to 500million by 2020. Demand for gold amongst those with a greater disposable income and limited investment opportunities will continue to grow.
- Chinese savings levels remain high – there is an estimated US$7.5 trillion in Chinese bank accounts and household allocations to gold remain small, around $300bn. Gold is seen as a stable, accessible investment by consumers, particularly in the light of rising house prices and a lack of alternative savings options. Chinese investors have a preference for physical gold over paper, with investment focused on small bars, gift bars or Gold Accumulation Plans (GAPs). New gold investment products mean that medium term demand for bars and coins could reach close to 500t by 2017 – a rise of nearly 25% above its record level last year.
- China has become the world’s number one jewellery market, nearly trebling in size over the past decade – at 669t in 2013, it accounts for 30% of global jewellery demand. Estimates suggest that demand will continue to grow and reach 780t by 2017. There are now over 100,000 retail outlets selling 24k gold and thousands of manufacturers nationwide.
- Consumer sentiment toward gold is unwavering – although 40% of jewellery consumption relates to weddings, the appetite for gold in China goes beyond occasions and gift giving. 80% of consumers surveyed for this report planned to maintain or increase their spending on 24-carat gold jewellery over the next 12 months believing that gold will hold its long-term value and because they expect to have a higher level of disposable income.
- Chinese electronics demand for gold will see small gains in the next four years – industrial demand has grown with electronics being the key driver (climbing from 16t in 2003 to 66t in 20134). China is also the leading market for gold related patents such as the use of nanogold in healthcare.
- Official gold holdings in China totalled 1,054t at the end of 2013 making the country the world’s sixth largest holder of bullion – based on this declared stock, gold represents 1% of China’s total official reserves (down from a peak of almost 2% in 2012) due to the rapid growth of the country’s foreign exchange holdings which reached around US$3.8 trillion at the end of 2013. Speculation continues as to whether the Chinese government has increased its gold holdings.
- China has gone from being a minor producer to the world’s largest source of mined gold – in the past ten years production has doubled from 217t to 437t.
Chinese companies may have accumulated up to 1,000 tonnes of gold for use as collateral in financing deals rather than to meet consumer demand in recent years, a new study says.
The report by the World Gold Council said imported bullion was being used “to raise low-cost funds for business investment and speculation”, and was part of the wider growth in shadow banking in China.
The People’s Bank of China has not provided an update on its bullion reserves since 2009, when it reported a holding of 1,054 tonnes, making it the world’s sixth-largest holder of gold.Speculation abounds about a large trove of gold that seems to be missing from the global market. Analysts calculate that up to 500 tons or more are stashed away, based on the difference between China’s domestic gold production of 428 tons in 2013 plus its estimated gold imports of at least 1,158 tons, and its annual demand of about 1,066 tons. The Chinese government does not release an import figure, so this number is disputed.
|Rank||Country/Organization||Gold (tonnes)||Gold’s share of national forex reserves (%)|
|3||International Monetary Fund||2,814.0||N.A.|
|13||European Central Bank||502.1||26%|
|32||Bank for International Settlements||115.0||N.A.|
|41||Federative Republic of Brazil||67.0||1.0%|
|42||Kingdom of Denmark||66.5||3.5%|
|43||Islamic Republic of Pakistan||64.4||27.4%|
|45||Republic of Belarus||49.4||24.5%|
|46||Republic of Finland||49.1||21.3%|
|47||Plurinational State of Bolivia||42.3||13.6%|
|48||Republic of Bulgaria||40.0||9.3%|
|49||West African Economic and Monetary Union||36.5||12.0%|
|52||Republic of Peru||34.7||2.3%|
|55||Republic of Iraq||29.8||2.0%|
|56||Republic of Ecuador||26.3||28.1%|
|57||Syrian Arab Republic||25.8||6.5%|
|58||Kingdom of Morocco||22.0||5.7%|
|59||Islamic Republic of Afghanistan||21.9||13.8%|
|60||Federal Republic of Nigeria||21.4||2.0%|
|61||Democratic Socialist Republic of Sri Lanka||16.6||11.2%|
|62||Republic of Serbia||16.6||4.8%|
|63||Hashemite Kingdom of Jordan||14.2||5.5%|
|64||Republic of Cyprus||13.9||65.8%|
|65||People’s Republic of Bangladesh||13.5||4.2%|
|66||Kingdom of Cambodia||12.4||11.1%|
|67||State of Qatar||12.4||1.4%|
|69||Republic of Colombia||10.4||1.2%|
|70||Lao People’s Democratic Republic||8.9||34.4%|
|71||Republic of Ghana||8.7||7.1%|
|72||Republic of Paraguay||8.7||6.2%|
|73||Republic of Latvia||7.7||4.6%|
|74||Republic of the Union of Myanmar||7.3||4.4%|
|75||Republic of El Salvador||7.3||10.6%|
|76||Republic of Guatemala||6.9||4.3%|
|77||Republic of Macedonia||6.8||11.1%|
|79||Republic of Tajikistan||6.4||51.1%|
|80||Republic of Azerbaijan||6.0||2.0%|
|82||Republic of Lithuania||5.8||3.5%|
|84||Kingdom of Bahrain||4.7||3.7%|
|85||Nation of Brunei, the Abode of Peace||4.0||4.9%|
|86||Republic of Mauritius||3.9||5.2%|
|87||Republic of Mozambique||3.7||6.6%|
|90||Republic of Slovenia||3.2||18.5%|
|93||Bosnia and Herzegovina||3.0||3.1%|
|94||Grand Duchy of Luxembourg||2.2||10.7%|
|95||Hong Kong Special Administrative Region||2.1||0.0%|
|96||Republic of Iceland||2.0||2.2%|
|97||Independent State of Papua New Guinea||2.0||2.3%|
|98||Republic of Trinidad and Tobago||1.9||0.9%|
|99||Republic of Albania||1.6||2.8%|
|100||Republic of Yemen||1.6||1.2%|
|Sum||31,320.4||Excludes G6 figure as countries separately listed|
Privately held gold
As of October 2009, gold exchange-traded funds held 1,750 tonnes of gold for private and institutional investors.
|1||SPDR Gold Shares||ETF||1,239|
|2||ETF Securities Gold Funds||ETF||259.79|
|3||ZKB Physical Gold||ETF||195.53|
|4||COMEX Gold Trust||ETF||137.61|
|5||Julius Baer Physical Gold Fund||ETF||93.50|
|6||Central Fund of Canada||CEF||52.71|
|8||Sprott Physical Gold Trust||CEF||32.27|
|9||ETFS Physical Swiss Gold Shares||ETF||27.97|
World gold holdings
|Investment (bars, coins)||16%|