| March 18, 2011 |
Inflation risk is driving "explosive" buying of physical gold in China, putting the country on a path to becoming the world's number one gold consumer and driving demand for the yellow metal to a 10-year high.
And the country's insatiable yearning for the precious metal could send gold prices to $2,500 in the next six months.
Chinese demand for gold bars and coins reached 180 tons last year, up a whopping 70% from the year before.
Chinese demand for gold jewelry hit an all-time high of 400 tons.
The country's gold demand nearly tripled in the last 10 years, and it could easily double again in less than a decade.
Currently, India is still the biggest market for gold, with total demand rising by 66% to 963 tons last year. But buying may slacken this year. The government is likely to increase import duties on gold in the forthcoming budget.
Gold imports by India climbed to a record of 918 metric tons last year, with Indians continuing to buy jewelry as a store of value.
Inflation Drives Demand Higher
Investment demand for gold in China was especially hot in the fourth quarter of last year, rising 84%. And the surge was mainly due to concerns about inflation.
The significant increase in demand seen in China, India and around the planet is reflective of the uncertainty facing consumers. People are buying gold to protect themselves from macroeconomic risks and rising inflation.
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