Thursday, January 7, 2010

Gold buying frenzy grips China

In 2002 the Chinese government allowed its citizens to buy gold bullion, for the first time since the Communist party took power in 1949. Easing restrictions were designed to provide a new investment outlet for China's record household savings. Since the financial crisis hit in 2008, the Chinese government has been out encouraging people to invest in gold and silver. Their drive seems to be working. CommodityOnline is reporting that a gold buying frenzy is gripping China:
China is on a gold buying spree and the rush is set to continue in 2010 as gold jewellery sales in mainland China and Hong Kong are expected to ramp up. Gold sales have risen by 10 per cent this year and are expected to accelerate in the coming two months. Recent bullion purchases by central banks, including India and China, have fueled shoppers’ sentiment and helped sales during past months. The mainland maintained its position as the top buyer of gold last month. It bought 454 tonnes of gold, topping India and Russia.
The mainland now ranks No 6 in the world in gold holdings, but is expected to continue increasing its reserves to dilute its US dollar asset holdings. Some years back, China surpassed South Africa as the largest gold producer. And China is all set to overtake India as the largest consumer of the yellow metal. [In addition],China is also set to outshine several other countries including India and the Middle East to become the largest trading ground for gold in the world.
Latest statistics from the Ministry of Industry and Information Technology say China’s gold output in the 11 months of 2009 till December 1 was 282 tonnes, an increase of 14.6 percent increase over the same period in 2008. The report said mining companies expanded output last year after bullion prices soared to record highs, with production in November alone reaching 27.952 tons.
On gold demand in the dragon country, the China Gold Association says that the estimated demand for the precious metal was 450 tons in 2009, up 13.8 percent from 395.6 tons in 2008. "With household income increasing, Chinese consumers are buying more jewelry and investing in gold assets. All of these are boosting gold demand," Zhang Bingnan, general secretary of China Gold Association told China Post. The Chinese families are on a buying spree of gold ornaments, gold bars, gold coins and gold ETFs. But they are not alone. Chinese mining companies, bullion dealers, gold associations, jewelers and traders are all in the grip of the 'yellow' fever with one aim: buy and trade gold. China, indeed, is in the grip of a gold buying frenzy.
So there you have it folks, yet another reason to buy gold. And for those of us who already own it - we have one more reason to sleep soundly at night - a solid bid by 1 billion Chinese under our golden investment.

2 comments:

Used Cellphones said...

Hi

Great and very helpful article, i really like it thanks for sharing this useful information with us but can you tell me something about sell unwanted gold if yes, then please let me know..

thanks

The Firecracker Report said...

Hi,
We are not very familiar with the website you linked to, however from what we know, the secondary gold market particularly for jewelry is very lucrative. Last year several players (such as the one you referenced) set up temporary shop in wealthy neighborhoods such Greenwich, CT and did brisk business buying jewelry off of old wealthy folks. Pretty sure their margins are north of 30%. They usually send the jewelry to be melted into gold bars and resold. (As an aside we usually do not recommend investing in gold jewelry because the jeweler adds a huge spread as making charges and the gold is 14k-18k in purity. We suggest investors buy gold coins/bars instead).
Hope this is the information you were looking for, if we misunderstood your question feel free to contact us at firecracker.report@gmail.com. We will try our best to answer your query.