China would likely surpass India as the biggest gold market in the world this year, an official with the World Gold Council (WGC) said recently.

In 2011, China’s gold demand of 769.8 tonnes was up 20 percent year-on-year as a result of increases in both jewellery and investment, WGC said in its latest Gold Demand Trends report. The largest rise was in investment, where demand of 258.9 tonnes with a value of $13.4 billion (RMB84.5 billion) leaped by 69 percent. China jewellery demand increased every quarter of last year and was the largest single jewellery market worldwide for the second half of 2011.

 

India, currently the world’s largest gold market, recorded a gold demand of 933.4 tonnes in 2011. Gold jewellery accounted for over 500 tonnes and the investment market demand reached 366 tonnes. Indian demand also accounted for 25 percent of total bar and coin demand worldwide.

"What we can see from these 2011 figures is that there were two main factors driving the results: Asian growth and optimism on the one hand and western desire to protect assets against uncertainty on the other," said Marcus Grubb, managing director for investment at WGC.

"Looking particularly at Asia, there was a major boost to the overall figures from the increase in Chinese demand, which is a trend that we see continuing over the next year. It is likely that China will emerge as the largest gold market in the world for the first time in 2012. What is certain is that the long-term fundamentals for gold remain strong, with a diverse and growing demand base, coupled with constrained supply side activity," Grubb continued.

Global demand for gold in 2011 rose to 4,067.1 metric tonnes, worth an estimated $205.5 billion – the first time that global demand has exceeded $200 billion and the highest tonnage level since 1997, WGC said in its report. The main driver for this increase was the investment sector where annual demand was 1,640.7 tonnes, up 5 percent on the previous record set in 2010 and with a value of $82.9 billion.

The top markets for investment demand in 2011 were India, China and Europe, WGC said.