BEIJING, March 29 (Reuters) - China's gold demand is expected to double over the nextdecade due to jewellery consumption and investment needs, the World Gold Council (WGC) said in its first report on the world's fastest growing consumer of the metal.
Currently the world's second-largest gold consumer after India, China has seen its gold demand grow at an average rate of 13 percent per year over the past five years. Demand from China's two largest sectors -- jewelry and investment -- reached a combined total of 423 tonnes in 2009, with 314 tonnes supplied by domestic mines.
"This shortfall creates a snowball effect as China's gold industry may not be able to keep pace with the annual leap in domestic consumption despite rising to be the world's largest gold producer since 2007," WGC said in the report.
"We are actually very conservative," the WGC's Far East managing director Albert Cheng told Reuters in an interview. "The growth is based on the wealth accumulated by the Chinese population. The more important thing is that Chinese central policy is more looking inward at domestic consumption, expanding into the west to bring them up to the level of a coastal city."
China's per capita consumption of gold jewellery is one of the lowest, at 0.26 grams, when compared with other major gold consuming countries. If gold were consumed at the same rate per capita as in India, Hong Kong or Saudi Arabia, annual Chinese demand could increase by at least 100 tonnes or as much as 4,000 tonnes in the jewelry sector alone, it said.
Cheng estimated China's total stock of gold at about 5,000 tonnes and said the figure was low because Chinese people had only been allowed to buy gold in the last 20 years. Also, the surge in the gold price from about $250 per ounce 10 years ago to over $1,100 per ounce now had already drawn out much of the gold available for recycling.
"Anybody who has unwanted jewellery, I would say that they would have already sold. The next trigger is that the price has to go very high, say $1,500, then you will trigger people to sell some marginal jewellery."…