According to the World
Gold Council’s (WGC) latest analysis of the gold market, during 2011 Chinese jewellery demand increased significantly to 756.8 metric
tons – a 20% increase in comparison with the previous year. Investment
demand for gold in China increased by a record 69%. In Europe gold demand
climbed for the seventh year in a row. Furthermore, central banks in
developing countries have also have been stocking up their gold reserves in
order to diversify out of the US dollar.
Notably, during the second half
of 2011 – for the first time in history – China outpaced its neighbour India as the world's largest jewellery market. Gold demand from Chinese investors reached
a total of 258.9 metric tons, or $13.4 billion. Chinese and Indian demand
together accounts for 55% of global jewellery
demand. In 2011 total Indian demand was 933.4 metric tons.
In Europe investment demand for
gold climbed for the seventh year in a row. Demand for the yellow metal is
strong, owing to the continent’s sovereign debt crisis. Some fear that
Greece and other peripheral euro countries will buckle under the strain of
EU-imposed austerity, and that they will be forced out of the eurozone. This currency turmoil could drastically
increase European investment demand for gold. Total 2011 European gold
investment demand increased by 374.8 metric tons. Gold demand is particularly
strong in Switzerland and Germany.
Meanwhile, central banks in
developing countries increased their buying substantially last year. In 2010
all the world’s central banks purchased 77 metric tons net; but in 2011
this figure increased to 439.7 metric tons. This huge surge is a result of
emerging countries’ desire to diversify their currency reserves (in
contrast, western central banks are not buying gold).