Why Indians and Chinese buying less gold this year

Gold consumption in China and India, the world's top two buyers, is set to drop 15 to 20 per cent in 2016 after lower investment demand and jewellery sales, an official at a leading importing bank said.

Lower demand from the two countries, which account for more than half of the global market, could limit a rally in global prices which are trading near a two-year high.

"Indian demand would be 15 to 20 per cent lower in 2016 than the previous year. Higher prices, weak investment demand contributed in reducing consumption," Sunil Kashyap, managing director, Global Banking and Markets at Scotiabank, told Reuters on Wednesday.

"India is not unusual. This is a general trend across Asia, even in China."

Gold prices have jumped nearly 28 per cent so far in 2016 to $1,352 per ounce, deterring traditional jewellery buyers.

"Unless the price comes below $1,300 per ounce we do not expect demand to pick up," Kashyap said.

Chinese demand for gold totalled 981.5 tonnes last year, followed by India on 864.3 tonnes, according to data compiled by the World Gold Council.

In India, local gold prices jumped to 32,455 rupees  ($487.21) per 10 grams in July, the highest in nearly three years, prompting consumers to sell their old jewellery.

As a result, total scrap supplies in India could jump to 120 tonnes to 180 tonnes in 2016, Kashyap said, with 10 to 15 tonnes coming onto the market each month.

In 2015 scrap supplies totalled 80.2 tonnes, according to the WGC data.

Weak demand and scrap supplies are helping India in reducing imports, which in July fell by 79.3 per cent from a year ago to 20 tonnes, the lowest level since March, GFMS data showed.

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