Gold (GLD, quote) demand in China dropped off in the first quarter of 2014. Economist are citing the weakness in gift giving of gold bars.

According to China’s (FXI, quote) Gold Association gold consumption for the 3 month period ending in March saw total of 322.99 metric tons of gold consumption or 2.45 tons more than same period last year.

Why the concern then?

The concern becomes clearer when we dig into the numbers. Gold purchased for jewelry did increase by 232.53 tons or 30.2% however, a 67.95 ton or 43.56% slide in gold bar consumption related to gift buying.

Now we can connect the dots. Most jewelry consumption is based on gift buying and if gift buying of gold bars are beginning to slump will it spread to the jewelry end of gift giving?

Why the slowdown in gold bar gift giving?

In a word…government.

The Chinese government has tightened regulations around gift giving. Comparing the pace of 2013 gold demand and to 2014 definitely indicates a slowdown in demand.

This could spell bad news for gold bulls with China being the largest gold producers, consumers of gold and the largest importer of gold. A gold trifecta

Bottom Line: We are not suggesting the gold prices are going to drop like a rock on the World Gold Council report but it does add pressure to the spot price of gold and needs to be added to the mix as part of your evaluation when investing in gold.