China's gold consumption is still surging after the final relaxation of strictures against holding the yellow metal in 2001 unleashed one of the world's greatest gold booms.
The World Gold Council (WGC) released its quarterly "Gold Demand Trends" report last week and, as always, it was filled with fascinating data on the strength of the global gold market. Gold demand grew 11 percent to 981.3 tons during the first quarter of 2011, worth $43.7 billion at quarter-end's price levels.
The increase was driven by a significant rise in demand for gold as an investment, up 26 percent from a year ago, as emerging markets look to protect their assets from rising inflation. Demand for gold bars and coins was up 62 percent and 42 percent, respectively.
This isn't exactly a new phenomenon in China. From 2007 to 2010, investment demand grew at a compounded annual growth rate of 68 percent, according to the CPM Group. The firm forecast Chinese investment demand to increase 34.7 percent during 2011 but based on this new data, it may need to adjust its forecast.
The CPM Group says the origins of this milestone in China's gold market can be traced back to the late 1980s when the government began lifting restrictions on gold ownership. This led to the establishment of the Shanghai Gold Exchange and other ways Chinese citizens could put a portion of their wealth in gold.
Then in 2001, the government lifted its final controls on the gold market, igniting one of the greatest booms in gold demand history. From 2001 to 2010, China's annual consumption of gold grew at a 7.5 percent compounded annual growth rate.
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