Mumbai: China may overtake India as the largest consumer of gold this year as demand for the yellow metal has touched a record high of 255.2 tonne during the January-March period in the world's second largest economy, the World Gold Council said on Thursday.
This comes in the wake of a 29 percent decline in gold demand to 207.6 tonne in India during the same period due to certain tax issues faced by the jewellery trade, increased import duty and the weakening rupee, the council report said.
Last year, the country imported 969 tonnes of gold, valued at a tad over USD 50 billion, while the demand was 933.4 tonne, which may fall to 800-900 tonne this year.
"As we previously forecast, it is likely that China will become the largest source of demand for gold in 2012," WGC managing director for investment Marcus Grubb said in a release.
In 2011, gold demand in China touched 769.8 tonne, which is likely to hit 900-1,000 tonne this year.
"As China locally produces 350-400 tonne annually, India will still remain the largest importer of the yellow metal this year too," WGC India managing director Ajay Mitra told reporters.
China's gold investment and jewellery demand reached 255.2 tonnes in the first quarter, up by 10 percent over last year.
This growth was mainly due to the strong demand during the wedding season, Chinese new year and gifting for babies born in this auspicious year of the dragon, it said.
Demand for gold investment went up 13 percent with a quarterly record of 98.6 tonne in the first three months of this year, up from the year ago period, demonstrating continuing investor demand to preserve wealth amidst ongoing concerns over inflation and economic slowdown, the report said.
Jewellery demand in China also increased significantly to 156.6 tonne, accounting for 30 percent of the global jewellery demand, making the country the largest market for the third consecutive quarter.
Although the pace of growth in China is slowing, gold continues to benefit from rising income levels, increasing urbanisation, economic growth and the high inflationary environment, the WGC pointed out.