The outbreak of coronavirus may lead to China's consumer demand for gold contracting 10-15% in Jan-Mar, Juan Carlos Artigas, director of investment research at the World Gold Council, said.
In Jan-Mar 2018, China's consumer demand for gold was at 255.3 tn, according to data from the council.
The coronavirus, or COVID-19, originated in China and has since spread to over 30 countries, leading to worries of a slowdown in the global economy. The number of confirmed cases globally has risen to over 79,000 and the death toll to 2,620.
Chinese President Xi Jinping has cautioned that the "current epidemic situation is still severe and complex, and the prevention and control work is at the most critical stage".
Chinese jewellery demand is seasonal, with Jan-Mar and Oct-Dec being traditionally strong quarters and Apr-Jun typically weak, the report said.
China is the world's largest gold consumer and accounted for 30% of global consumer demand in 2019, compared with 8% in 2003. China's demand for gold eased to 848.4 tn in 2019 from 994.3 tn in 2018.
In late January, Somasundaram P.R., India managing director, World Gold Council, had said that the body had not given an estimate for China's gold demand in 2020 because it did not know the impact of the spread of coronavirus on consumer demand. "But whether they will come back and buy later is not something we know. We will take a little time to come back to it," he said.
Chinese jewellery consumption contracted 10-15% during the SARS epidemic that developed primarily between late March and early July 2003.
China's economic activity has already been affected, and this may drag down growth in the country's GDP. This, in turn, will affect the global economy and increase investor uncertainty, which may support flight-to-quality flows into gold in China and other countries, it said.
However, the drag from potential deceleration in Chinese gold consumer demand may have a more noticeable impact on prices than it did in 2003.
The April gold contract on COMEX today hit an over seven-year high of $1,691.6 an ounce.
"Whether demand rebounds or continues to soften will depend on the duration of the epidemic and its impact on economic growth," Artigas said in the report.
