BEIJING (Commodity Online): China looks set to overtake India as the world’s largest gold consumer in 2009, with total demand for jewellery and investment forecast at 432 tonnes, a senior official at major metals consultancy GFMS said.

According to a report appeared in Economic Times, high gold prices are putting a larger damper on appetite for gold in India than in China, with Chinese demand robust, especially in the investment area, said Philip Klapwijk, GFMS executive chairman, at a gold conference.

GFMS forecasts total gold demand from China in 2009 to be 432 tonnes, compared with that of 422 tonnes from India. China’s investment demand alone was forecast at 83 tonnes, exceeding India’s 53 tonnes.

These figures exclude central bank purchases. India bought 200 tonnes from the International Monetary Fund in October this year.

Gold hit record highs above $1,225 an ounce on Thursday as the precious metal continued to attract investors looking for an alternative to the US dollar.

There is a huge latent demand in India and it will explode if prices fall significantly from current levels. India will react far more strongly than China to lower price environment, Klapwijk said.

In comparison, growth in jewellery consumption in China has been strong, especially in the last three to four years.

Very high local gold prices are discouraging investors to buy gold in India while China's gold buying has not been discouraged even when prices were rising to record highs.

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