You can add gold demand to the list of items being supported by China. China was the sole market to see positive growth in consumer demand for gold, rising 12 percent from a year ago the World Gold Council reports.
Total gold demand in China reached 120 tonnes, nearly double the amount from just four years ago.
Overall, gold demand was off 34 percent from 2008 but that is largely the result of exceptionally high demand increases during the darkest time of the financial crisis. On a year-to-date basis, gold demand is only down 6.3 percent.
China's improving economy has made consumers less price sensitive than those in India and the Middle East who have not fully adjusted to gold prices at current levels.
Jewelry demand in India fell 42 percent on a year-over-year basis but Indians haven't abandoned their strong cultural connection to gold. Exchange activity among consumers—where old pieces are swapped for new ones—has spiked.
The WGC says this "suggests a strong desire by consumers to remain attractive in the [gold] market."
BMO doesn't believe that the downtick in demand is a symptom of a long-term trend. In a research note, they write that "the combination of a strengthening economy, modest supply growth, central-bank buying and concerns surrounding the U.S. dollar and inflation should continue to support gold demand and prices into 2010."
