China's retail gold demand rose 2 percent in the first quarter on stronger appetite for jewelry while the desire for the yellow metal declined worldwide, the World Gold Council said Thursday.

The demand in China rose to 114 tons in the first quarter. The increase was solely the result of a 2-percent growth in jewelry consumption to 95.8 tons. But the appetite for net retail investment in gold dropped 2 percent to 18 tons in the same period.

"The increase in demand for gold jewelry, whilst global demand fell, suggests that there is a growing awareness among consumers in China that gold jewelry can also play a strong role as a store of value," said Aram Shishmanian, chief executive officer of the WGC.

Consumers on the Chinese mainland bought 89.1 tons of gold jewelry in the first quarter of this year, a rise of 3 percent from a year ago, and their purchases were the driving force for the bigger gold demand.

"There is most probably a seismic shift away from capital appreciation toward wealth preservation, and we believe this trend will define investment behavior in the next decade," Shishmanian said.

The Chinese have a traditional frenzy for the glittering yellow metal as a symbol of fortune and for its safe haven status, preferring 24-carat gold jewelry which is more popular in China than Western countries.

The demand in retail investment on the mainland fell 4 percent in the first quarter to 16.1 tons as investors sold because prices fell to close to US$1,000 per ounce.

Worldwide, retail gold demand dropped 14 percent to 470.2 tons. Global gold jewelry demand dimmed 24 percent to 339.4 tons while net retail investment rose 33 percent to 130.8 tons as consumers turned to gold bars and coins.

(Shanghai Daily May 22, 2009)