Singapore: China's consumption of gold in the first six months of the year surged by more than half as sliding prices of the metal lured buyers, data showed, reinforcing expectations that the nation will overtake India as the world's top gold consumer this year.
Gold prices have lost about a fifth of their value this year after 12 years of gains, releasing pent-up demand across the world and particularly in India and China, where gold is an essential part of weddings and gift-giving.
China consumed 706.36 tonnes of gold in the first half of 2013, up 54 percent from the year-ago period, the China Gold Association (CGA) said in a statement on its website on Monday.
It consumed 832.18 tonnes in all of 2012 and about 460 tonnes in the first half of 2012.
"China bought a lot when prices fell below USD 1,350 in April thinking it will not fall further," said Chen Min, precious metals analyst at Jinrui Futures in Shenzhen.
"They bought much more than usual in April and May to meet the need for later in the year."
In April, gold witnessed its biggest two-day fall in 30 years. The metal has recovered after dropping below $1,200 in June, but is still subject to volatile trading and negative sentiment as a recovering U.S. economy stirs worries of a scale-back in the Federal Reserve's stimulus measures.
"China's demand in April and May was unmatched," said one Shanghai-based trader. "They bought more than anyone and were consistent buyers even after prices recovered a little."
China's gold demand could hit a record 1,000 tonnes this year and will overtake India, the World Gold Council said last month.
India's consumption this year is expected to be lower than last year's 860 tonnes as the government is trying to curb imports and reduce its trade deficit.
The Chinese government does not release data on gold consumption or imports. Investors rely on data from trade groups such as the CGA and import numbers from Hong Kong - a key supplier to China - to gauge demand.
"All signs have been pointing towards China overtaking India. Their demand in the second half may not be this high, but they are still way ahead of India," said the Shanghai-based trader.
Chinese consumers would like to see more stability in prices and not just lower prices, which is why Chinese demand is subdued currently, analysts and traders said.
The CGA also said output in China, the world's biggest gold producer, reached 192.82 tonnes in the first half, up 9 percent from a year ago.