China’s Gold Demand Seen Rising by 17% in 2011

Think gold prices have lost their luster? China demand might put the shine back on.

China’s gold purchases could push imports of the precious metal bullion to 400 tons in 2011, up a little more than 17% from the estimated 340 tons imported last year, according to precious metals consultancy GFMS in London.

Increased appetite for silver investment products too, combined with a forecast 16% annual growth just for industrial purposes, could mean that China’s total silver consumption will outstrip domestic supply this year, Philip Kalpwijk, executive chairman of GFMS said Friday. “There is a widening demand for silver as an investment in China because of its lower entry point. It is also being increasingly recognized as a physical investment asset, which will support demand,” Kalpwijk told a press conference in Shanghai on Friday.

The Chinese government does not publish official statistics on gold imports, but the World Gold Council said the country produced around 340 tons in 2010. Last year, total consumption was about 700 tons, leaving a gap of at least 300 tons made up either by imports or sales of existing stocks, according to a China Daily report on China gold consumption.

The surge in imports, which jumped fivefold last year, has turned China, already the largest bullion miner, into a major overseas buyer. GFMS forecasts imply that imports will continue to grow at a robust pace despite high gold prices.

The SPDR Gold Trust exchange traded fund (GLD) is up 7.92% year-to-date ending May 27.