Demand for gold in China may slow in the second and third quarters on price fluctuations and the weaker consumption enthusiasm after the Sichuan earthquake, the World Gold Council told Shanghai Daily yesterday.

"The unstable gold prices may lead to a wait-and-see attitude among buyers in the second quarter," Wang Lixin, head of the gold advocacy group in China, told the newspaper yesterday. "Chinese buyers are not afraid of price increases but price fluctuations as the instability will confuse them on buying timing. Concerns of a possible economic slowdown may also curtail gold sales," he said.

The devastating 8-magnitude earthquake on May 12 in Sichuan Province also cooled consumption demand, he added.

"We expect gold demand in China to be stable this year as the macro-economy is still prospering," Wang said.

Gold demand in the country rose 13 percent in the first quarter amid a strong appetite for both investment and jewelry gold, the council said.

Demand for gold jewelry on the Chinese mainland rose 9 percent to 86.6 tons while that in Hong Kong dropped 5 percent to 3.6 tons and that in Taiwan tumbled 30 percent to 2.8 tons. Demand for investment-grade gold surged 63 percent on the mainland to 15.1 tons.

Rising prices of the metal in the first quarter attracted more investment interest in the metal in China.

The correction in the stock market also prompted investors to seek other investment channels. The benchmark Shanghai Composite Index shed 34 percent in the first quarter.

Concerns about high inflation also drove more investors to invest in gold as a hedging tool. China's consumer price index, the main gauge of inflation, rose 8 percent in the first quarter. The Olympics Games gold products also spurred buying of the metal.

Total gold demand on the mainland jumped 15 percent to 101.7 tons in the first quarter.

(Shanghai Daily June 4, 2008)