China gold demand to grow over 5 years, but at slower pace: Barclays

Singapore: China`s share of the global gold market will expand in the next five years as it will be one of the few countries witnessing demand growth, but at a slower pace, Barclays analysts said.

Demand from the world`s No.2 gold consumer has risen sharply in recent years amid Beijing`s measures to reform its bullion market. In 2013, when benchmark spot gold prices saw a 28 percent slump, China overtook India as the top consumer.

But it gave up the No. 1 spot last year as interest waned.

"China`s share of the global gold market is likely to rise sharply as it is one of the few countries where demand is likely to continue expanding over the next five years," Barclays said in a note dated Thursday.

But the growth rates are expected to slow sharply over the period, it added.

By 2020, China could be consuming almost half the world`s gold output, it said. China currently consumes nearly a third of the global output.

But bullion prices will not benefit much from the increase in China`s influence in the gold market, Barclays said.

"We do not expect this trend to be hugely positive for prices in its own right, as this growth will be taking place in a market where demand growth in many other regions is flat to down," the analysts said.
OTHER COMMODITIES

Barclays said the next five years will bring "huge changes" in China`s commodity demand as the transition to a less investment driven, more consumer-led economy gathers pace.

"The consensus view is that this will lead to a slowing of demand for almost all commodities, but we still see plenty of scope for China to create shocks and surprises in international markets," the bank said.

The biggest losers of the trend will be industrial metals, it said, adding that China`s metals consumption growth will slow "very sharply over the next five years".

In steel, rapid growth in the auto sector is set to partially offset a structural decline in infrastructure spending and construction activity.

Oil demand growth is also set to continue slowing as growth rates for diesel, petrochemicals and residual fuel oil contract, while the effect on crude oil demand will be partially offset by faster growth in refined products like gasoline and jet fuel.