New Report Reveals China Driving a Healthy Market for Gold

Released by a leading economics consultancy in precious metals, the ‘Gold 2015’ report shows many reasons to be encouraged by gold’s future.

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Following analyses of supply and demand in the precious metals market from consultancies CPM Group and Metals Focus, the GFMS team from Thomson Reuters has released its own report that echoes many of the same findings.

Lawrence Williams of Mineweb reports that like the previous reports, the GFMS report, titled ‘Gold 2015’, predicts that gold will soon reach its lowest point and will then likely begin to rise. By the end of 2015, the consultancy predicts that the precious metal will average $1,170 an ounce, with an average of $1,250 in 2016. Much of this increase is attributed to heightened purchases in Asian markets.

Indeed, a sizeable portion of the report focuses on Asian gold consumption and how investor demand in Asia is expected to recover. An interesting note in the Gold 2015 report, especially when compared to February’s World Gold Council (WGC) figures, was that GFMS placed China at the very top of its list of major gold consumers in 2014, which is likely due to them taking Chinese bank activity into account.

Investment bank Macquarie estimates that Chinese banks on their own hold 1,400 tonnes of gold; when included in the demand and consumption figures, that would put the nation far ahead of others. In fact, out of top 20 gold consuming nations, India was the only one to really rival China, with each consuming over three times as much as the third-placed USA.

The report adds that global jewelry production saw a 6% increase, mainly due to Indian fabrication reaching record heights in spite of their restrictions on gold imports. Unsurprisingly, China and India made up for 54% of the global demand for jewelry and bars in 2014. With these figures, it’s easy to see why just a few countries continue to dictate the gold flow from West to East.

In line with its focus on supply and demand, the 116-page report also outlined the struggles of the mining industry, both current and upcoming. After a flat 2015, gold production is expected to have a “palpable” decline. This could end up being another stimulant for the price of gold, as mining operations won’t be able to quickly adjust to an increased demand once gold starts going up.

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