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Informist, Wednesday, Oct. 23, 2024

 

MUMBAI – China's demand for gold will improve, driven by an anticipated rebound in the country's economic growth following the recent stimulus measures announced by it, World Gold Council Research Head China Ray Jia said in a report Tuesday. "Our analysis shows that economic growth is the fundamental driver of Chinese gold demand," Jia said.

 

The level of gold prices in China and the number of weddings there are other key factors that will have a bearing on gold jewellery consumption in that country, according to the report.

 

"The recent measures are likely to provide support for China's economic growth. A reduced mortgage burden along with various other measures designed to revive the property sector could boost consumer and investor confidence. This is borne out by the fact that institutions have raised their expectations for China’s GDP growth in 2024," Jia said. For each percentage point increase in China's annual GDP growth, there is a 5.2% rise in gold jewellery consumption and a 5.1% increase in buying purchases of bars and coins. 

Gold demand in China has been under pressure and surging prices have hit gold jewellery consumption. And while a pessimistic outlook for China’s economy has limited household spending on gold, the aggressive stimuli should provide tailwinds, Jia said.

 

In the case of equity, every 1% increase in the value of local equities reduces gold investment demand 0.4% as enhanced investor risk appetite tends to limit safe-haven demand for gold, according to the report. "...while limited historical data limits our ability to quantify the effect for gold ETFs (exchange traded funds), we anticipate investment in this sector may also face competition from equities and other risk assets – and the gold price will continue to be a key factor impacting gold ETF flows in China," Jia said. 

 

In India, demand for gold is likely to rise in the ongoing festival season, largely supported by rural purchases, World Gold Council India Research Head Kavita Chacko had said in a report on Monday. Market reports indicate early signs of a resurgence in gold purchases due to various festivals, with demand largely driven by wedding purchases, the report said. Demand from rural areas is also seen rising due to an improvement in overall consumption. "Favourable monsoons and higher crop sowing this year are anticipated to boost rural incomes, potentially leading to higher gold purchases", Chacko had said.  End

 

US$1 = INR 84.07

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Ashutosh Pati

Edited by Avishek Dutta

 

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