Gold Price Flat, China Still Buying

NEW YORK (TheStreet) -- China's buying gold no matter what the price.

Gold prices were falling as profit taking and a stronger U.S. dollar led to another correction in prices. Gold delivery for December was sinking $6.40 to $1,134.80 an ounce at the Comex division of the New York Mercantile Exchange. Prices have traded as high as $1,146 still shy of its new record high of $1,153.

Global investment demand rose sequentially in the third quarter with higher prices but was down significantly from a year earlier with one exception: China.

Chinese consumer demand for gold rose 12% in the third quarter to a record high of 120 tons and retail investment demand rose 30% from a year ago to 26.8 tons. The World Gold Council reported that total global gold demand for the third quarter was $24.7 billion, up 15% from the second quarter, but down 34% from the third quarter in 2008.

Investors fled to gold a year ago when the global financial crisis peaked and investors looked to preserve their wealth in an alternative asset. For the past year, investment demand has been growing in the futures market leading to higher prices while slipping overall. Demand for gold ETFs, bars and coins fell 46% from a year ago to 227.2 tons.

Aram Shishmanian, CEO of World Gold Council, is optimistic. He says he expects investment demand will continue to improve "well supported by continued economic and currency uncertainty, inflation concerns and the search for diversification. In the official sector, we expect to see a continuing trend of central banks diversifying their dollar exposure in favor of the proven store of value represented by gold."