Chinese stock rally eats into gold demand

Global gold demand eased 1 per cent in the first quarter, hit by a big retreat in Chinese jewellery buying as local investors rushed to snap up shares instead.

Jewellery demand in China, the world's largest consumer of gold, fell 10 per cent as the country's stock markets rallied, the World Gold Council said in a report today.

Middle-aged women, the so-called Dama, or "aunties", who were among the most prolific buyers of gold in 2013, rushed to open stock accounts instead, the industry body said.

"This shift has eaten into demand for gold, which has lacked clear price direction in recent quarters," it said.

Gold traded at $1,215 per troy ounce in London on Thursday from $1,205 at the start of the year. By contrast, the Shanghai Composite Index is up 35 per cent this year.

Almost 8m new stock accounts were opened in China in the first quarter, up 433 per cent from a year earlier.

Global jewellery demand fell 3 per cent to 600.8 tonnes, below the five-year average of 570.3 tonnes, the council, an industry body, said. India, however, saw an increase of 22 per cent.

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Global gold ETF flows were one bright spot for gold, with inflows seen for the first time since the fourth quarter of 2012, the report said.

"We speak to lots of investors and our sense is that the mood music and attitude toward gold is a little less bearish than this time last year," said Alistair Hewitt, head of market intelligence at the World Gold Council.

Excluding ETF demand, global gold demand would have fallen 3 per cent compared with the previous year.

Among central banks, Russia remained a strong buyer with net purchases of over 30 tonnes in the quarter, bringing total gold reserves to almost 1,240 tonnes, the report said.

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