China, the world’s largest gold producer, may have record demand and output this year as jewelry consumption soars and miners expand production after prices reached all-time highs, according to the China Gold Association.

The country’s gold demand may be more than 450 metric tons this year,
up from 395.6 tons in 2008, and output may climb to 310 tons, compared
with 282 tons a year earlier, Zhang Yongtao, deputy secretary-general
of the association, said at a conference in Kunming today. Annualized
growth in China’s gold production was 9.5 percent in the past eight
years, he said.

China overtook South Africa to become the world’s largest producer in
2007 and the World Gold Council said in July that the nation may pass
India as the biggest consumer. Bullion touched a record of $1,195.13 an
ounce Nov. 26 as a weaker dollar drove demand for precious metals as an
alternative asset.

“The inflation concern this year has boosted the Chinese consumer
demand for things like property, autos and gold,” Zhou Shijian,
professor at Tsinghua University, said today from Kunming, capital of
the southern Yunnan province.

Bullion, up 34 percent this year, is set for a ninth annual gain as
central banks, pension funds and individual buyers seek to protect
their assets from potential currency debasement and inflation. Gold may
climb to $1,500 an ounce as the dollar falls amid low interest rates,
Kenneth Tropin, chairman of Graham Capital Management, told Barron’s in
its Nov. 30 issue.

‘Double-Digit’

Jewelry sales in China will climb at a “double-digit’’ pace this year
as record household savings fuel demand for investment products and
wedding gifts, Hong Kong Resources Holdings Ltd. Chairman Kennedy Wong
said Oct. 23. Middle-class buyers in China, who have only just started
to buy gold as an investment product, drove a 16 percent gain in gold
and silver jewelry sales in the first nine months, said Wong, whose
company has 219 jewelry stores in mainland China.

Gold for immediate delivery declined 0.9 percent to $1,177.63 an ounce
on Nov. 27 as commodities slumped the most this month after Dubai
sought to defer some debt payments, rattling investors and spurring a
dollar rally. Bullion found support from International Monetary Fund
sales to central banks. Sri Lanka bought 10 metric tons from the IMF
for about $375 million, the IMF said, following India and Mauritius.
China is “quite a likely” buyer in coming weeks, Ben Westmore, an
analyst with National Australia Bank, has said.

“Record prices boosted profitability of Chinese miners, giving them
incentive to expand production,” the gold association’s Zhang said in a
speech. Shares of Chinese miners have jumped this year with Zijin
Mining Group Co., the nation’s largest gold producer, more than
doubling, outpacing a 70 percent gain in the benchmark Shanghai
Composite Index.

Source: Bloomberg

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