Gold prices may continue to stay at high levels in the coming months as investors seek the metal as a safe haven investment on concerns about faster inflation, slowing global economic recovery and geopolitical crisis, according to China National Gold Group Corporation (CNGGC).
Chinese gold demand is expected to exceed 700 metric tons in the next several years and sharply outpace domestic production. Annual gold production in China, world’s second largest consumer of precious metal, is expected to reach 400 tonnes by 2014 with demand at 700 tonnes, signaling room for a strong ramp up in imports, said CNGGC.
Chinese gold demand grew by 32 percent despite a concurrent 25 percent rise in the annual average local currency gold price. For the first three months of the year, China's investment demand more than doubled to 90.9 tons compared to India's 85.6 tons.
The gold demand in China was being driven by its population's cultural affinity to the metal and monetary tightening fears. China's central bank's positive view on gold also added demand for safe heaven.
Gold recorded annual gains for the last 11 years. Eurozone debt crisis, rising inflation in emerging markets and weak U.S. dollar added gains to the gold for the past year. Gold is used as hedge against inflation and generally it moves inversely to the dollar as it makes cheaper for non-U.S. investors.