* China's gold demand poised to dip for a second year in
2015
* Retailers in China's jewellery hub warn of more declines
* Chinese consumers lose confidence in gold as an investment
* Weakness comes as demand in No.2 consumer India also soft
By James Pomfret and A. Ananthalakshmi
SHENZHEN/SINGAPORE, Dec 23 (Reuters) - As Chinese consumers
cut back on gold purchases for a second year in a row, nowhere
is the slowdown being felt more than in the country's
once-bustling jewellery manufacturing and retail hub of Shuibei.
Gold demand has taken a hit from a slowing economy and
Beijing's anti-corruption drive, which has cut demand for luxury
products, but there are fears of a more protracted loss of
confidence among buyers in the world's top consumer of the
precious metal.
With buying in No.2 consumer India also soft, another year
of weak Chinese demand would help pile more pressure on global
gold prices XAU= languishing near six-year lows.
The hundreds of jewellery stores in Shuibei, a district of
Shenzhen only a short hop over the border from Hong Kong, have
seen business take a downturn since a buying boom peaked in 2013
as once-voracious Chinese consumers turn cautious.
"They don't have confidence in gold now given the weak
prices, so demand won't pick up anytime soon," said Wang
Zhichang, regional manager of the Glory Gold store, adding
revenue was likely to fall a further 10 percent next year on top
of a drop of 10-20 percent this year.
Wang, who was among 30 staff in the store at a time when
there were no customers, said that a number of jewellery
factories had closed in the past year in the area.
Big retail chains, including Chow Tai Fook 1929.HK , the
top jeweller by market value, are also closing branches and
cutting back store openings in the mainland and Hong Kong.
Chow Tai Fook last month reported a 42 percent drop in net
profit in the April-September period and said it would open only
a net of 60 stores in China in its current financial year ending
March, from a previous target of 150.
"Customers have become more rational with their purchases,"
a company spokesperson said by email.
Illustrating the strains in the industry, Chinese banks have
begun to see loan defaults by jewellery manufacturers, hurt by
weak sales, Reuters reported last month.
BARGAIN HUNTING "DAMA" PULL BACK
From just 200 tonnes in 2003, Chinese demand for gold
jewellery, bars and coins hit an all-time high of more than
1,000 tonnes in 2013, when prices of the metal snapped a 12-year
rally.
Demand has since fallen back and with prices now down by
more than a third since 2012 Chinese confidence has weakened in
gold as an investment.
One of the biggest blows to China's gold consumption has
been the pullback of "dama" buying, a Chinese term for
middle-aged women known for their love of hunting out a bargain.
They were at the forefront of the 2013 gold rush but many
have had their fingers burnt as gold has repeatedly hit
multi-year lows.
"The golden period of China's dama demand has passed," said
Shu Jiang, chief analyst at Shandong Gold Group, the parent of
Shandong Gold Mining Co Ltd 600547.SS .
Shu said unless there was a drastic price drop over a short
period of time, the dama were unlikely to return, though others
argued that what is really required is a rebound in prices.
"Ironically, what you actually need to see for physical
demand to pick up is for prices to rally," said Victor
Thianpiriya, commodity strategist at ANZ, who expects Chinese
demand to decline next year.
"The confidence in gold as a supposed safe haven or as an
investment has been battered over the last few years," said
Thianpiriya.
Indian demand has also taken a hit and in the December
quarter is likely to fall to the lowest in eight years, hurt by
poor investment demand and droughts that have slashed earnings
for millions of farmers.
A slump in demand in the two biggest consumers could further
pressure miners, such as Barrick Gold Corp ABX.TO , which has
been forced to sell assets and cut costs to trim debt amid a
slide in profits from three years of falling global gold prices.
Though a fall in the value of local currencies in big
producers such as Australia and South Africa has partly shielded
miners' exposure to weaker demand.
YOUNGER BUYERS
To prop up demand, retailers are trying increase their
online presence to attract younger buyers, who prefer more
fashionable lower purity 18 karat jewellery over the higher
purity and more pricey pieces often favoured by older women.
With the gold price outlook still bearish, some in the
industry fear they might have to wait longer for a rebound.
"We're expecting another 20 percent fall in business (next
year)," said Zhang Fengming, the owner of another gold store in
Shuibei, as he chain-smoked in his upstairs office.
"The Chinese will get back into gold when it becomes more of
an attractive investment. I think in three to five years time
there will be a rebound," said Zhang, a 30-year veteran of the
jewellery business.
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Graphic on China gold demand http://reut.rs/1RC7mGf
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(Editing by Ed Davies)