Sunday, January 22, 2012
300 million Chinese love gold
According to the World Gold Council, China is expecting to overtake the world’s top gold consumer, India during the coming years. China accounted for 23 percent of the world's total consumer physical gold demand in the first nine months of 2011. An increase from 19 percent in 2010 and this trend looks set to continue.
A growing middle class and demand for wealth in China is leading the demand for gold and the government is encouraging private ownership of gold.
A Chinese shipping executive Ping Bo believes that buying gold is the best way to protect the family's wealth and give his 10-year-old son a kick-start. “For my son, the idea is that he will get a nice stash of gold that he can cash out when he turns 21 or when he gets married," said Ping.
Over two million people have opened accounts in the past two years in order to accumulate gold at the Industrial and Commercial Bank of China (ICBC) who launched the accounts last April to encourage citizens to own gold.
Investors can buy as little as one gram a month or as much as they can afford.
"It's a fantastic way for me to accumulate gold," said Ping.
ICBC's have 22 tonnes of gold ready for investors the number of which reached 2.33 million by the end of November. The Agricultural Bank of China launched their product in September, and have accumulated over 70,000 investors signed up to buy a minimum of one gram of gold per month.
"The product will retain its vitality as long as the demand for physical gold investment keeps growing," said the bank in a written reply to a Reuters enquiry.
It is likely that China’s heavy emphasis on gold investments will play a major contribution to the gold price this coming year.
"The Chinese really love gold," said Shi Xudong, deputy head of the Administration Office of the Precious Metals Department at ICBC "The fact that the government has started to clean up the gold market is favourable to our business, as investors who have been trading on illegal platforms will need to look for new investment platforms."
His reference was to a recent crack down on informal gold exchanges outside the government controlled Shanghai Gold Exchange and Shanghai Futures Exchange.
Some analysts have predicted that there will be over 300 million Chinese gold investors in the market by the end of 2012. This is certainly feasible when you consider the middle class population is well over the 247 million at the last count. This is out of a population of 1.3 billion people and, growing at a rate of 8.5 percent per annum.
This massive demand by Chinese investors keen to preserve their wealth is going to have a significant effect on the gold price in the coming years.
Perhaps now is the right time to buy gold.