Gold demand in China (including Greater China) rose 16 per cent to 392 tonnes (337 tonnes) in the third quarter of 2011, gaining primarily from the restricted Yuan trade against the dollar.
Chinese Yuan touched a 17-year high of 6.3354 per dollar on November 14. Buying the dollar-denominated yellow metal becomes cheaper as China, unlike India, fixes reference rate for dollar on a daily basis and allows it to be traded 0.5 per cent on either side of reference rate.
The currency gained 4 per cent this year and is rated the best performer among Asia's top 10 most-traded currencies, excluding the yen, said an analyst.
Chinese Premier, Mr Wen Jiabao, was recently on record assuring measures to allow Yuan flexibility in an active, gradual and controllable manner. On the contrary, the sharp depreciation of rupee against dollar has made gold imports costlier in India. This was reflected in the 23 per cent fall in India's gold demand to 203 tonnes (264 tonnes).
Interestingly, China's gold coin demand rose 24 per cent to 122 tonnes (98 tonnes), while that of India fell 18 per cent to 78 tonnes (95 tonnes). Jewellery demand in India dropped 26 per cent to 125 tonnes (168 tonnes), even as it jumped 13 per cent to 269 tonnes (337 tonnes) in China.
On Monday, the rupee touched 52 to a dollar for the first time in two-and-a-half years as domestic equity weakened and oil importers bought dollars. The contrast movement in demand has helped China reinforce its leadership position and widen the gap with India.
Pure gold price in China touched 430 Yuan per gram on Monday as investors rushed to buy the precious metal to hedge against rising inflation. China's Consumer Price Index shot up to 5.5 per cent year-on-year in October, indicating that the world's second largest economy is suffering the fastest growing price in almost three years, the analyst added.
In India, gold prices were traded at Rs 2,890 a gram on Monday. Globally prices fell last week as the dollar strengthened most currencies on mounting fears of the Euro-zone debt crisis worsening. The US economic data was better than expected with manufacturing activities continuing to expand in November.
Retail sales exceeded expectations in October, easing some concerns over the growth outlook in US, said Mr Mitesh Rasaikar, CEO, Maya Iron Ores, which tracks gold price movements.