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Gold set to regain luster again as investors rush to hedge losses

By Wu Yiyao in Shanghai (China Daily) Updated: 2015-08-14 09:49

Gold demand in China fell by 3 percent in the second quarter of the year to 216 metric tons on the back of slowing economic growth and lower offtake, the World Gold Council said on Thursday.

In its quarterly outlook for the precious metal, the WGC said the prognosis for the next six months looks better as demand is increasing, and more investors are keen on diversifying their investment options amid fluctuating stock markets and a weaker currency. According to the council, China's demand for gold jewelry dropped by 5 percent from a year ago to 174 metric tons at the end of the second quarter.

"Demand for gold, both jewelry and investment items such as coins and bars, has been recovering in China, as price-sensitive consumers are cashing in on the price drops and diversifying their risks by using gold as a hedge against risks from other sectors," said Roland Wang, managing director of WGC's China operation.

Chinese investors have already been battered by the wild swings on the bourses and the recent depreciation of the renminbi against the US dollar. Most of them may consider gold as an investment option again, said Wang.

Market sources said investor appetite has risen steadily despite the price declines. In Shanghai's Yuyuan Garden, a gold product stores hub, several gold stores have seen several single purchase deals of more than 200,000 yuan ($31,250) in the past few months.

Li Chunlan, a manager with Shanghai Yahua Gold Ltd, said on Thursday: "If you had bought a gold bar in mid August last year, the price would have been 325 yuan per gram. The same is today available for about 290 yuan per gram. Many investors think it is an opportune time to buy gold." The central parity rate of the yuan was around 6.15 against one US dollar in mid August last year while the current rate is about 6.40.

Li Jianxin, a wealth manager with Bank of Shanghai, said: "Earlier this week I helped five clients adjust their portfolios by adding more gold investment. Demand for gold coins has surged by some 20 percent."

Globally, gold demand dropped 12 percent in the second quarter to a six-year low of 914.9 metric tons, a challenging picture for the industry as demand from China and India fell, which accounted for almost half of the fall in global demand.

"Prospects for the remainder of the year are more encouraging, with consumers responding to the recent price drop," the WGC report said.

Wang said that the entire gold industry has been making changes to face the challenges, including expanding sales channels, applying new technologies to product development, and researching demands of the younger generation of gold consumers who were born after 1980.

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