China demand may rescue Asia gold market
China demand may rescue Asia gold market
TOKYO (Reuters): Asian demand for gold has been lackluster
this year as slowing economies have hurt jewelry offtake and
industrial use, although China may revive the market as it
liberalizes the domestic gold trade, analysts said on Tuesday.
Gold demand in 10 countries in east and southeast Asia for
calendar 2001 will likely exceed last year's 815 tons because an
expected rise in Chinese demand will offset declines elsewhere,
said Itsuo Toshima, a regional director of the gold mining body,
the World Gold Council (WGC).
"It's too early to project how big Chinese gold demand will
be. But I expect their demand to expand because China will likely
start implementing programs to liberalizing its gold market by
the end of the year," Toshima said in an interview.
The Council, a gold promotion organization funded by major
mining companies, has acted as an adviser to China over its gold
market reform and has proposed deregulation steps to the
government, including allowing individuals to buy gold investment
products.
It estimates Chinese gold demand reached 207.5 tons in
calendar 2000, up from 205 tons in 1999.
Toshima said China's gold demand could grow to 800 tons in the
next 10 years if its market is liberalized, just like India's
gold demand has quadrupled to over 800 tons since the country
deregulated its gold market in early 1990s.
At present, all gold produced in China must be sold to the
central People's Bank of China. Individuals are banned from gold
investment.
Traders agree China has the potential to contribute to Asian
demand this year, although they were doubtful about growth in
other markets.
In Japan, gold demand for calendar 2001 is expected to shrink
from some 200 tons estimated for last year because consumers are
reducing spending on luxury goods such as jewelry amid economic
gloom, traders said.
Use of gold by Japan's semiconductor makers was also declining
as manufacturers curb production in the face of slowing sales and
rising inventories.
"I'm afraid Japanese gold demand this year might slip by 10-20
percent from last year," one Japanese trader said.
Latest data from Japan's Finance Ministry shows imports in the
January-March quarter of this year totaled 6.82 tons, down from
12.54 tons a year earlier.
Demand for gold bars and other investment tools has been poor
this year as Japan grapples with deflation, which has reduced the
need for gold -- traditionally a hedge against inflation.
"In recent months, fresh buying of gold bars was overwhelmed
by profit-taking," another Japanese trader said. Holders of gold
bars were taking advantage of the yen's weaker trend against the
dollar, which contributed to higher yen-denominated gold prices.
Traders said the latest rally in world gold prices had
accelerated sales of gold bars by Japanese investors.
"U.S. funds were said to be shifting funds to gold from the
equity and debt markets. But as far as Japan is concerned, I
don't believe such safe-haven buys have occurred," another
Japanese trader said.
But Japanese investors may turn from net sellers to net buyers
of gold bars if they regain confidence about the upside potential
for prices, he said.
"World gold prices appear to have bottomed out and may have
entered an uptrend. Investors may return as buyers," he said.
Gold was fixed at $291.25 an ounce in London on Monday, its
highest since June 13, 2000. It was a bounce after hitting a
$253.75 spot low in February.