China's demand for gold will double in 10 years, making the country the world's second largest consumer of gold after India, the World Gold Council (WGC) has said.
Gold demand in China is likely to continue to accelerate in the long term, as buyers' appetite would keep growing despite higher gold prices, the London-based organisation said Monday in its first-ever report on China's gold market, Xinhua news agency reported.
The report titled “Gold in the Year of the Tiger” said China’s demand for gold had increased an average of 13 percent per year over the past five years.
China has also been the world's largest gold producer since 2007.
In 2009, gold consumption in China reached 462 tonnes, which was worth more than $14 billion, or 11 percent of global demand, the report said.
Within the next decade, Chinese gold consumption could double from the 2009 levels, it predicted.
The growing gold consumption came from all sectors, including jewellery sales, private investment as well as industrial and central bank demand, Albert Cheng, managing director for WGC's Far East office, was quoted as saying.
According to the report, the gold currently held by the People's Bank of China accounted for about 1.6 percent of total reserves, which was low by international standards.
China, which is the largest US treasury bonds holder, may consider gold in its search for alternative investment choices with ongoing uncertainty about the future direction of the US dollar, the report said.
“With total reserves of $2.4 trillion, China still has the ‘fire power’ left in its books should the country decide to increase its gold allocation,” it said.
However, Yi Gang, vice governor of China's central bank, had earlier said that gold would never be a major investment channel for the country's huge foreign reserves.