SHANGHAI, CHINA — China will consume a record 350 tons of gold this year amid surging sales of gold bullion, up 17 per cent from 2005, the official Xinhua News Agency reported Tuesday.
Gold output in China is likely to top 240 tons this year, with industry profits exceeding 5.5-billion yuan, or $700-million (U.S.), the report said, citing the chairman of the China Gold Association, Cheng Fumin.
China is the world's third-biggest consumer of gold after India and the United States. Gold use in 2005 exceeded 300 tons, 80 per cent of which went to the jewellery industry, the report said.
Mr. Cheng said that surging gold prices had dented jewellery sales but were boosting purchases of bullion.
Gold prices surged to a record $725 an ounce in May but have since fallen back to about $650 an ounce.
Some economists have been lobbying for China to invest more of its foreign exchange reserves, now thought to top a record $1-trillion, in gold to hedge against a weaker U.S. dollar. Much of China's reserves are in dollar-denominated Treasuries.
“If China adopts a long-term strategic approach, accurately predicts the market price of gold and purchases gold in a timely and reasonable manner, it can preserve and increase the value of gold,” and improve the structure of its reserves, Gao Jie, a professor at the University of International Business and Economics, wrote in a commentary in the online edition of the People's Daily, a Communist Party newspaper.
According to the World Gold Council, China has 600 tons of gold holdings, equivalent to about 19.3 million ounces. Gold accounts for less than 1.3 per cent of the country's foreign reserves, according to Mr. Gao.
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