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A customer tries on a gold ring in central Beijing in this photo from 2010. The World Gold Council said last week that China’s demand for gold dipped 7 per cent in the second quarter of 2012.


On a street where customers have lost their appetite for gold, even the gold vending machine is out of service.

China's first and much-celebrated ATM selling gold bars and coins, perched eight floors above Beijing's well-known Wangfujing pedestrian shopping district, has quietly gone out of service, less than a year after its grand unveiling – just as the World Gold Council announced last week that China's demand for gold dipped 7 per cent in the second quarter of 2012.

"It was very popular," one of the young attendants at the operating company, Gongmei Gold Group, says, reassuring a visitor that a new and improved version of the ATM will be back this fall. "It wasn't being used for the last few weeks."

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With the price of gold steady in the $1,550 to $1,600 U.S. per ounce range this summer, the normally busy halls of the gold market below the ATM, in the Beijing Arts and Crafts building, have also quieted. China's traditionally loyal gold buyers are shying away, waiting for better times.

"We just took a look around, we didn't buy anything," said Bonnie Liu, a 23-year-old university student, after perusing the market halls with a friend this week. Earlier this year, she said, she bought two small gold figurines, a phoenix and a dragon, as small investments toward her university studies in healthcare policy. "It's Chinese tradition that people like to wear gold, and it's more stable than real estate or the stock market."

China is predicted to surpass India as the world's largest consumer of gold by the end of this year, despite that country's gold-dowry tradition which keeps demand strong. Unusually, India's demand for gold jewelry dropped 30 per cent this year, reflecting higher inflation and a poor monsoon season which bodes ill for the country's agricultural sector.

At the World Gold Council, managing director Marcus Grubb said the metal's performance reflects the economic "softness" in both India and China, which represent over 45 per cent of the world's demand.

"However, through all the uncertainty, it is clear that gold's fundamental properties as a vehicle for capital preservation and a source of liquidity continue to endure," Mr. Grubb said, citing central banks' moves to increase gold holdings.

On the macro level, China's appetite for gold has not lessened. The People's Bank of China is thought to be trying to diversify its foreign reserve holdings away from U.S. dollars, both into other currencies and by increasing gold holding; last week, Canada's Barrick Gold revealed the state-owned China National Gold Group is in preliminary talks to acquire African Barrick Gold, which produced 688,000 ounces of gold last year.

As for the bored gold vendors of Beijing, just around the corner lies the annual gold rush of the Mid-Autumn Festival, also known as Golden Week for its traditional, unbridled shopping frenzy.

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"We'll wait for the price to go down a little, and then we'll buy some small gold bars," Ms. Liu said.

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