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September 11, 2009

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Gold demand to retain sparkle

CHINA'S retail gold demand is likely to maintain a stable double-digit growth in the second half of the year even if bullion prices rally above US$1,000 an ounce again, a key industry body said yesterday.

First-half sales of gold in the world's second-biggest market rose 14 percent year on year to 446.6 tons.

Gold prices broke the US$1,000 support level on Tuesday in London for the first time in seven months before falling back. Analysts are divided about prospects for a further rally.

"A higher price is a two-edged sword," said Wang Lixin, general manager of World Gold Council in China. "On one hand, the strong momentum may woo more investment demand. On the other hand, higher prices may discourage jewelry demand."

In the first half, sales of gold to investors soared 62 percent while jewelry sales rose 7 percent. Excluding China, gold jewelry sales plunged 26 percent worldwide.

"Wide fluctuations in bullion prices are more likely to influence gold demand than just prices themselves," said Wang, who added that he expects gold demand in China to grow in line with its rising economy.

China's economy expanded 7.1 percent in the first half, and growth in the second quarter came in better at 7.9 percent.

Aram Shishmanian, chief executive officer of the WGC, said earlier this week that investors were turning to gold as they seek assets which preserve their wealth, whatever the financial weather.


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