Gold demand declines nearly 20%

China's gold demand dropped almost 20 percent in the first half as bullion used for bars and coins plunged, the China Gold Association said yesterday.

Total demand dropped 19.4 percent from a year earlier to 569.5 tons in the first half, according to the Beijing-based industry association.

Demand for bullion bars dropped 62 percent to 105.6 tons, while that for coins and other miscellaneous gold products slumped 44 percent to 11 tons.

Demand for jewelry and industrial usage remained robust during the period, both increasing about 11 percent to 426.2 tons and 26.8 tons respectively.

On the production side, total output rose 9.4 percent year on year to 211.1 tons.

China overtook India as the world's biggest gold market last year with record-high demand of 1,132 tons.

Zheng Yudong, head of investment strategy and advisory at Standard Chartered Bank China, said the bank remains bearish on gold.

"We still believe that holding gold assets presents an opportunity cost for investors," Zheng said on Tuesday. "Gold prices may rise, but investors could make more by investing in other assets."

Recent major geopolitical events like the downed Malaysian flight in Ukraine and the conflict in the Gaza Strip have had little impact on gold prices, but other unforeseen events are possible, he added.

The spot contract for gold of 99.99 percent purity on the Shanghai Gold Exchange edged up to 261.20 yuan (US$42.14) per gram yesterday from 261.09 yuan. Gold for December delivery fell 0.8 yuan to 261.9 yuan per gram on the Shanghai Futures Exchange.