Chinese demand for gold set to slow

Gold demand in China, the world's largest consumer after India, may slow in the second half of this year after surging in April, according to the China Gold Association.

"The kind of frenzied buying in late April and early May won't be repeated," said Zhang Bingnan, secretary-general of the association. Some of the jewellery demand earmarked for festivals or weddings later this year may have been brought forward to April and May after prices fell, he said.

Gold has declined 15 per cent this year on concern the US Federal Reserve may rein in stimulus that helped bullion cap a 12-year bull run in 2012, and as some investors lost faith in the metal as a store of value. Gold takes centre stage in weddings in China in the form of jewellery and other gifts as a promise of a long and happy future together.

Chinese consumers rushed to buy jewellery, bars and coins as a 14 per cent drop in prices in two days in April was seen as a buying opportunity, Mr Zhang said.

Uncertainty about whether gold will fall further this year may deter some investors in China from buying in the second half, he added.

Gold slid by 31 per cent from a record in September 2011 through April 16, when it set a two-year low of $US1321.95 an ounce. It was trading Friday at $US1414.22.

Demand reached a record 294.3 tonnes in the three months to March, the gold council estimates. China's purchases in 2013 should be better than last year, when the country consumed 776.1 tonnes, little change from the previous year, according to the gold council.

About 6.6 million brides in China will receive gold at their weddings this year, and more than 80 per cent of jewellery made in China is 24 carat.

Investors cut 479.2 tonnes of the metal from exchange-traded products this year, while holdings in gold-backed ETPs have shrunk 18 per cent. This was the first reversal after expanding every year since the first product was listed in 2003.