China’s Gold Demand Seen Getting a Boost If Stock Rally Fades

24-Jun (Bloomberg) — China’s gold demand may rise if the country’s stock market reverses its rally, according to the World Gold Council.

Demand in the world’s largest user may rise as high as 1,000 metric tons, a nearly 3 percent increase from last year, Roland Wang, China director of the London-based group, told reporters in Shanghai on Wednesday. Consumption sank in the first quarter as investors flocked to the Shanghai Composite Index’s 16 percent gain while bullion prices stalled.

“We will be more confident to say China’s demand in 2015 will beat 2014 if we see an end of the stock market rally and a start of a gold price surge,” Wang said. “Chinese investors usually seek asset tools to prevent risks in stock markets and chase rallies in gold.”

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PG View: The surge in June imports, amid recent stock market volatility, suggests the shift from shares to gold may already be underway. The Shanghai Composite Index fell 7.4% today, it’s biggest drop in 7-years. The index is now down 19% and on the verge of a bear market in just 2-weeks.