China has grown immensely in the global gold market. India has been the largest gold consuming nation for many years, but in 2012 China is predicted to take over the top spot. Chinese demand reached around 770 metric tons in 2011. This demand is a 20% increase from the previous year. This growth is strong, and experts see the demand continuing to skyrocket in China. There are several factors that have caused this increase in demand.
Gold has been a part of Indian culture for centuries. It has been seen as a status symbol, fashionable, a good gift, and a good investment. On top of that, gold is bought at festivals, on holidays, given as wedding gifts, and offered to Indian deities. Despite all of the history and culture around gold, the high price of gold and low value of the rupee has lead to a drop in demand in India. The drop has allowed China to make its move to be the number one global gold consumer.
Gold bars are seen as a safe investment by the Chinese as inflation becomes a concern. Gold is also considered a status symbol, and has become very popular as jewelry. The Chinese middle class has also seen an increase in disposable income, and many have chosen gold as one of their main purchases.
China has not only been importing more and more gold, it has also begun to produce more gold. In the past 10 years, China has doubled its production of gold to help support its increase in demand. It is likely that production will continue to increase as Chinese demand grows.