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China's gold demand seen holding up as yuan declines: WGC
[MANILA] China's gold demand this year is expected to at least hold steady with last year at just under 1,000 tonnes and will not likely be dented by this week's currency devaluation, the World Gold Council (WGC) said.
Yuan-denominated gold prices in China, the world's top consumer of the metal, spiked nearly 6 per cent this week, boosted in part by investors seeking a secure store of value as their currency weakened, traders said. "(Investors) realise the special role of gold as a hedging tool against the devaluation of the currency," Roland Wang, managing director for WGC in China, told Reuters by phone on Thursday.
He played down the possibility that the relative rise in local prices due to the devaluation would dampen buying and result in a net drop in demand. "I don't think they will see this as too expensive to buy gold," Mr Wang said, adding that gold would also benefit as investors diversify their asset allocation after the recent tumble in equities markets. "We still have the confidence that consumption of gold in China will remain at similar levels as last year," he said.
Spot gold touched a three-week high of US$1,126 an ounce on Thursday as a weaker Chinese yuan raised doubts about the pace of expected US interest rate hikes.
China's central bank said on Thursday that there was no basis for further depreciation in the yuan given strong economic fundamentals.
China consumed 973.6 tonnes of gold last year and the WGC has forecast demand this year at between 900 and 1,000 tonnes.
Chinese demand was around 497 tonnes in the first half of 2015, with second-quarter demand down 3 per cent year-on-year at 216.5 tonnes on slower jewellery buying.
Mr Wang said there have been signs of a recovery in demand for both jewellery and investment since mid-July after gold prices dropped, and he hopes the trend will continue in the last two quarters of the year.
China and India, the world's top two gold buyers, account for about half of global demand, which the WGC said slid to a six-year low in the second quarter.