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China's Private Gold Demand Beats 2009 Forecast

Commodities / Gold and Silver 2010 Jan 06, 2010 - 10:31 AM GMT

By: Adrian_Ash

Commodities THE WHOLESALE PRICE of investment gold rose further in Asia and London on Wednesday, breaking 12-session highs above $1130 an ounce as world stock markets struggled and the Dollar ticked higher on the currency market.

New data from the ADP private-payrolls company showed a sharper-than-forecast US job loss of 84,000 in December, taking 2009 losses to 4.7 million.

Private gold demand in mainland China meantime rose to 450 tonnes in 2009, the China Gold Association said today, up 13.8% from 2008 and beating the top-end of BullionVault's recent 2009 forecast, published in the Financial Times' China Confidential.

The figure likely beats India's consumer demand for 2009 as well, confirming Chinese households as the world's No.1 buyers despite Monday's sharp revision by the Bombay Bullion Association to its gold import figures, now estimated at 300-350 tonnes.

"With household income increasing, Chinese consumers are buying more jewelry and investing in gold assets. All of these are boosting gold demand," said Zhang Bingnan, general secretary of the CGA, to the China Daily.

The People's Bank of China recently announced its gold coin and silver production for 2010, including commemorative pieces for the 16th Asian Games and Xinmao (2011's Year of the Rabbit).

All told, the central bank's schedule for 2010 accounts for almost 3 million pieces requiring more than 58 tonnes of silver and over 20 tonnes of gold bullion.

Today the PBoC reiterated its "loose money" stance on interest-rate policy, agreeing at this week's annual conference to target "moderate credit growth in 2010 to back the stable and relatively fast development of the country's economy."

On the domestic supply-side, the Ministry of Industry and Information Technology said today that China's gold mining output rose 14.6% to 282.50 tonnes during the first 11 months of 2009.

"Chinese people are buying more gold these days," says one Beijing gold dealer. "There are increased sales in jewelry shops for gold ornaments, coins and bars.

"In fact, many people are now convinced that gold is the best investment asset."

Here in London on Wednesday – where snow disrupted rail lines and kept many traders at home – "Net speculative length has unwound from recent extremes," said a technical analysis from Barclays Capital, noting how non-industry players have cut their bullish betting on gold futures and options from last month's historic peaks.

"[Thus] the near-term prospects for gold have improved. Furthermore, with daily momentum rolling higher from oversold conditions and price action having repeatedly held trendline support, odds favor continued gains."

The Euro currency meantime fell towards 16-week lows beneath $1.4300 after a leading central-bank executive said there was no chance of fellow members helping Greece to finance its yawning budget deficit.

"The markets are deluding themselves when they think at a certain point the other member states will put their hands on their wallets to save Greece," Italian paper Il Sole quoted Jurgen Stark of the European Central Bank in an interview.

Across the 16-nation currency union, new data today showed industrial orders falling for the first time in 7 months in November. The Eurozone's PMI Services index lagged analyst forecasts for December, while wholesale-goods price inflation fell sharply.

Gold priced in Euros today hit its best level in 3 weeks and threatened the all-time spike of early December, gaining above €786 an ounce.

The gold price in British Pounds rose above a one-month high at £704.20 an ounce as Sterling also dropped back on the forex market, falling from an initial spike to $1.6050.

"Gold will have to consolidate above $1133 before a push towards $1150 becomes likely," says Walter de Wet at Standard Bank.

"We expect the market to remain range-bound ahead of Friday's non-farm payroll data."

Crude oil meantime held near $82 per barrel on the continued cold snap in China, Europe and the north-eastern United States.

Silver also rose, adding more than 8% from last Wednesday's 8-week low to break above $18 per ounce.

By Adrian Ash

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

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