China's 2016 Gold bar and coin demand marks strongest since 2013

UNITED STATES February 07 2017 5:55 PM

LONDON (Scrap Register): China had a strong finish to the year. Q4 gold demand rose 86% year-on-year, pushing annual demand to 284.6 ton, the highest level since 2013. This was slightly above the 5year average of 275t. Four factors underpinned China’s strong finish.

Chinese gold bar and coin demand has steadily increased over the past 3 years. It is now above its 5year average, said World Gold Council in a report.

However, India’s gold market suffered in 2016. A raft of regulatory developments, fragile rural sentiment following weak monsoons in 2014 and 2015, and the soaring gold price for most of the year, pushed bar and coin demand down to its lowest level since 2005.

Q4 began positively in India. Demand was good leading up to and during Diwali. Rural incomes had been boosted by a good monsoon – the best in three years – and the price drop in October from Rs30,940/10g at the start of the month to a low of Rs29,710/10g was the opportunity many investors had been hoping for. 

Festive sales were up around 30% on the previous year, and most retailers expected this momentum to continue through November and December. But the shock demonetisation announcement on 8th November disrupted the market. 

The frenetic rush to convert unaccounted money into gold boosted bar and coin demand in the immediate aftermath of the announcement. But it was short lived. 

The subsequent cash crunch rocked the market, with sales dropping sharply. Many of the factors that hung over India’s gold market in 2016 look set to linger into 2017. For deeper analysis of these factors, please see our recent publication India’s gold market: evolution & innovation.