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Precious Metals demand is shifting to emerging markets, led by China and India

Since 2006, when India and China absorbed about a third of total gold global mining supplies, the average of India and China per capita GDP has approximately tripled to $4,100 (in 2013) with a total population of 2.7 billion.

This rapid per capita GDP growth trend is likely to continue and has the potential to accelerate. China surpassed India in 2013 as the world’s largest consumer of gold. 

Together, China and India consumed about 70% of global gold production in 2013, up from about 32% in 2006. In many emerging markets, cultural – and in some cases – religious affinities for the precious metals, notably gold are boosting demand. 

According to ETF Securities, the rapid increase in emerging markets per capita income and more widely available investment access is allowing citizens to gain and preserve wealth , notably in the precious metals , at the most rapid pace in history. In the more industrial focused precious metals; silver, platinum and palladium , emerging market demand growth has been equally strong. 

In 2011, China surpassed the US as the world’s largest user of silver. Silver fabrication demand in China has increased from about 5% of the global total in 2000 to reach near 25% in 201 3. In platinum and palladium ( the PGM’s), rising demand from China and other emerging markets is causing a structural shift in demand. The main source of demand for the PGMs is for catalytic converters and emissions standards are tightening, notably in emerging markets due to pollution issues . 

However, the largest single growth driver for platinum the past few years has been Chinese jewelry, accounting for about 25% of total demand in 2013, up from 14% in 2008. China is now the world’s largest auto market, selling over 2 2 million vehicles a year, mostly gasoline, which utilize greater amounts of palladium for emissions controls, ETF Securities added.

In 1980 when gold and silver made their previous highs near $870 an ounce . And $50 an ounce. respectively, most current emerging markets had virtually no participation in the precious metals markets. In 1980, the average per capita income of China and India combined was about $290 an ounce, Russia was behind the iron curtain of the Soviet Union and the per capita GDP of Brazil was $1,260 an ounce , compared to $11,300 in 2013 (current US dollars).

The EMs are now the dominant PM demand drivers compared to having virtually zero participation during the last PM rally in the 1970’s.

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