The World Gold Council reports that the increase in investment demand is a 'global phenomenon', reporting a 19% year-on-year rise across the world in its most recent report this morning.
In China alone, gold investment demand jumped 70% last year as Chinese people bought gold as a store of value. Demand is projected to grow a further 40 percent to 50 percent this year and jewelry demand will expand by 8 percent to 10 percent this year.
Gold imports by India, the largest buyer of gold in the world, climbed to a record of 918 metric tonnes in 2010, driven by a surge in jewelry demand with Indians continuing to buy jewelry as a store of value.
Reuters quoted a leading Chinese executive from Industrial and Commercial Bank of China (ICBC) (1398.HK)(601398.SS), the world's largest bank by market value, as saying that demand for gold was growing at a voracious pace due to surging inflation.
Zhou said that the huge increase in Chinese demand seen last year would happen again in 2011 due to a “choppy stock market” and concerns about how rising interest rates will affect property markets.
Perhaps most importantly and rarely mentioned in the western media is the fact that the Chinese government is encouraging their citizens to buy physical gold and silver bullion having banned gold ownership from 1950 to 2003 (see video).
"Unlike the property market, investment in the gold sector is something the government is encouraging," Zhou said.