India, China To Boost Gold Demand Even More?

As I write this Tuesday afternoon, the spot price of gold is just north of $1,660- somewhat higher from last week when a number of observers were claiming the gold bull market was either dead or on its last legs. While the precious metal saw some major price drops recently, it should be noted that Indian jewelers were on strike, and China wasn’t observed to be making any significant acquisitions of the yellow metal. These two nations are the world’s largest gold buyers.

Well, the strike in India is over, and it’s suspected the People’s Republic of China isn’t as uninterested in gold as it appears. From Allen Sykora (Kitco News) on the Forbes website today:

Physical demand for gold is expected to pick up again now that Indian jewelry shops have ended a strike, although it remains to be seen how strong this demand will be and whether the protests will resume next month, analysts said.

A majority of India’s jewelers closed their shops for roughly three weeks to protest a doubling of the import tax on gold from 2% to 4% and introduction of an excise tax of 1% on unbranded gold jewelry. Jewelers reopened late last week when Finance Minister Pranab Mukherjee reportedly offered assurances he would consider a rollback of the excise duty…

India, along with China, is one of the world’s two largest consumers of gold. The end of the strike comes at a key time, with the approach of India’s gift-giving Akshaya Tritiya festival on April 24.

(Editor’s note: Italics added for emphasis)

And from the Australian business news and commentary website Business Spectator today:

The Australian’s Robin Bromby reckons Zijin Mining Group’s bid Norton Gold Fields is just the beginning of a much larger gold-buying program in China, and that there’s more to it than simple mergers and acquisitions.

“A very reliable source close to several gold companies tells us Chinese interests are not only taking stakes in explorers and miners, they are also buying gold directly from producers and shipping it home. There is much talk in gold bug circles in the US that the recent purchase by the Bank of International Settlements of more than four tonnes of gold may have been wholly or in part on behalf of the People’s Bank of China. Our source is quite clear on one thing: the move on NGF is just the beginning. China wants more gold and it doesn’t want to pay full market price for it (as it doesn’t for any mineral) so it will be looking to pick up more Australian gold producers and add the yellow metal to its existing central bank gold pile. Not something the Perth Mint will be happy to hear.”

(Editor’s note: Italics added for emphasis)

Sounds like the PRC doesn’t want to advertise its gold buying program to the rest of the world than it needs to. Which is understandable, as gold prices could rise in anticipation of purchases.

I guess the Chinese haven’t heard about gold being just a “barbarous relic” yet.

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