China set to become biggest gold market

Perhaps driven by the turbulence in global markets, gold prices continue to edge higher. The price of gold saw an uptick this morning as the U.S. dollar was paring its recent gains versus a basket of currencies ahead of the inflation data from the U.S.

But there is another development afoot that is causing a silent revolution in the bullion market. According to a report on FT.com, China is set to leapfrog India as the largest consumer of gold.

The World Gold Council has predicted that by 2012 China will have overtaken the world’s largest gold market, India, to become the world’s biggest consumer of gold for the first time.

As for India’s slide from the top spot, there are a couple of explanations. First, the softening rupee has made gold prohibitively expensive and, therefore, unaffordable to most Indian buyers. Second, the Chinese have been aggressively buying gold thanks to growing wealth and the liberalization of the domestic gold market.

Gold for April delivery, the most actively traded current contract, edged up $3.80 to $1,732.20 an ounce. Yesterday, gold ended flat on some upbeat U.S. economic data and higher oil prices that fuelled inflation concerns.