China closes gap on India as top gold market

China is poised to overtake India to become the world\'s biggest gold market this year as rising incomes fuel demand for the precious metal and a weak rupee diminishes Indian purchases, an industry group said yesterday. The amount of gold bought in China rose 20 per cent last year over the year before to 770 metric tonnes, the World Gold Council said in its annual report. That put China behind only first-place India, where 933 metric tonnes were bought. Worldwide, the amount of gold purchased rose 0.4 per cent to 4,0671 metric tonnes worth $205.5 billion (Dh754.65 billion). The council said it\'s ‘likely that China will emerge\' as the world\'s largest gold market for the first time this year. Article continues below Rising incomes in China, which is the world\'s No 2 economy, have resulted in a surge in demand for gold jewellery and other luxury goods. China became the world\'s largest market for gold jewellery in the second half of last year as demand rose in every quarter, the report said. Gold bars, coins and other gold-backed products are also popular because of a lack of other investment options in China. Popular hedge The long-term rise in the price of gold has also made it a popular hedge against inflation — gold hit a record nominal high of $1,891.90 an ounce in August, though prices have fallen since then. Gold futures for April delivery ended trading in New York on Wednesday at $1,728.10 an ounce. Central banks, many in developing economies, also boosted gold sales as they sought to diversify their growing piles of foreign currency reserves. They bought 439.7 metric tonnes of gold last year, up from 77 metric tonnes the year before and the highest amount since 1964, the report said. The poor performance of China\'s stock and property markets — the other two main choices for Chinese with money to invest — is boosting the popularity of gold as an investment, said Albert Cheng, a managing director at the London-based World Gold Council. The Shanghai Composite Index is down 20 per cent over the past year while house prices are starting to fall after authorities put in place curbs to cool an overheated market. Strong Chinese demand for gold also helped sales leap 33.5 per cent last year in Hong Kong, a popular destination for wealthy mainland shoppers because of lower taxes in the semi-autonomous Chinese territory. Demand for gold jewellery in India, meanwhile, fell in the second half of 2011 because of the weakening rupee, which made gold more expensive. Indians also grappled with high inflation last year that ate away their purchasing power.