Are gold markets becoming more and more polarized?
While wholesale gold traders from Sudan, Egypt, Libya, Morocco and other countries, who used to buy gold from Saudi Arabia, have opted to Dubai, China has overtaken India as the biggest consumer of gold in the world.
The wholesale gold traders have opted to Dubai as they pay 0.5 percent of the value of gold works compared to 5 percent in Saudi Arabia. However, there was a 15 percent decline in full-year gold demand in a year where jewelry, bar and coin demand reached an all-time high. According to the World Gold Council, Chinese consumers set a new annual record, while India was resilient in the face of import restrictions.
Last year, demand from China for gold for jewelry, coins and bars totaled a "remarkable" new record of 1,065.8 tons.
That was ahead of Indian demand of 974.8 tons, according to the council representing leading gold producers.
Global demand for gold in jewelry last year was the highest for 16 years, but investment funds were heavy sellers and the price fell by nearly a third during the year. The price is around $1,324.80 an ounce now.
However, for the whole of 2013, demand from India rose by 13 percent from the level in 2012, partly because of heavy buying before some of the restrictions took effect in July.
Going by these developments, it looks as though the gold market has become polarized. This appeared so in 2013 as 21 percent growth in demand from consumers and value-seeking investors contrasted with large-scale outflows from exchange traded funds.
The gold demand reached 3,756 tons, valued at $170 billion in 2013. Saudi Arabia held 17th place in global gold holdings in 2013 with 322.9 tons of gold or 2 percent of reserves.
Saudi Arabia, as an important market in the Middle East, also has to do more to attract gold buyers as disparity in customs duties on imported gold has diverted gold trade from Saudi Arabia to Dubai.
Despite fall in global demand, Saudi Arabia showed some improvement. By the end of September 2013, gold jewelry demand in Saudi Arabia was 71.7 tons worth $3.4 billion —- up 13 percent year-on-year.
By: Khalil Hanware
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