Daily Gold Update

Source: Mineweb.com

London— Chinese citizens have been taking to gold as a significant investment option according to reported figures from the Shanghai Gold Exchange. Last year, for example, some 1,250 tonnes of gold were traded on the Exchange � up 38 percent on a year earlier. Figures for the current year could be substantially higher due to various new gold metal investment options which have become available, like the recently announced 100 gramme gold bars which make gold trading by individuals more accessible, rather than just by corporate entities. The previous smallest size of gold bar available was one kilogramme.

However trade does not mean offtake. Most traded gold will move between traders rather than take new gold off the market, although the new smaller size bars may mean an increase in physical demand. Nevertheless, Chinese consumption of physical gold is expected to continue to grow sharply, and local estimates put this at around 340 tonnes in 2006 and continuing to rise.

Meanwhile Chinese gold production is also rising � with estimates that 2006 output will have reached 230-240 tonnes. The country is currently the world�s fourth largest gold producer � after South Africa, the U. S. and Australia. Some observers anticipate China will be the world�s largest producer in ten years� time as existing gold mines in the established gold mining countries become depleted moving the focus of production to new areas.

Chinese jewellery demand � particularly for white gold � is also reported as growing strongly, while industrial offtake, primarily in the electronics sector, is rising as well.

Thus there is little doubt that China is a very significant player indeed in the future direction of the world gold price. As more and more of a consumer society develops we would anticipate demand growing more rapidly than supply with a corresponding positive impact on the metal price.

Wan Guoli, a manager of the China Gold Association's International Cooperation division, was reported by Reuters in August as saying that current consumption is well in excess of that estimated by the World Gold Council and could almost double to 600 tonnes in five or six years, making the country the world�s second largest consumer of gold after India.

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