Because their gold demand will double within 10 years!
Published on China.org.cn, Xinhua, China – March 29, 2010
China’s demand for gold is set to double in tonnage terms within just 10 years, driven by growing needs for consumption and investment, the World Gold Council (WGC) said Monday in a report.
The London-based organization released it’s first-ever report of China’s gold market, “Gold in the Year of the Tiger”, in Beijing, London and New York on Monday.
Gold demand in China is likely to continue to accelerate in the long term, as buyers’ appetites would keep growing despite higher gold prices, the report said.
China’s demand for gold has increased every year over the past five years, making the country the world’s second largest consumer market for gold after India. China has also been the world’s largest gold producer since 2007.
In 2009, gold consumption in China reached 462 tonnes, which was worth more than 14 billion U.S. dollars, or 11 percent of global demand, said the WGC report.
Within the next decade, Chinese gold consumption could double from 2009 levels, it predicted.
China’s growing gold consumption came from all sectors, including jewelry sales, private investment, as well as industrial and central bank demand, said Albert Cheng, managing director for the Far East office of the WGC.
“Near-term inflationary expectations and rising income levels are likely to provide further support to the local market for gold,” the report stated.
Further momentum could well result from the Central Bank increasing its gold reserves.
According to the report, currently the gold held by the People’s Bank of China accounted for only about 1.6 percent of total reserves, which was very low by international standards.
China, as the largest U.S. treasury bonds holder, may consider gold in its search for alternative investment choices with ongoing uncertainty about the future direction of the U.S. dollar, said the report.
“With total reserves of 2.4 trillion U.S. dollars, China still has the ‘fire power’ left in its books should the country decide to increase its gold allocation,” said the report.
Yi Gang, director of the State Administration of Foreign Exchange (SAFE) and also vice governor of China’s central bank, said earlier this month that China would consider “cautiously” investing more of its foreign exchange reserves in gold based on market conditions.
“If China’s gold demand were to continue to increase so markedly, domestic supply would be unable to keep pace, calling for more investment in gold exploration and production.” said the report.
All Things Considered – John’s Commentary: Why care about China and gold? We need to pay heed to their buying behavior for a number of reasons. China is the most populous country in the world. Private ownership of gold was illegal until 2009 and is now being very actively encouraged. China is also the world’s largest gold producer. The Chinese save 30-40% of their income. More importantly, China is diversifying out of their U.S. debt ownership. Pay very close attention to China!
Action to take now: Buy silver on a 75/25 basis favoring silver.
What to buy: I have come across tremendous pricing on 1 oz. U.S. Arts gold Medallions. In silver, pricing on bags of pre-1965 U.S. silver coinage is as low as it has been in 18 months.
Quote of the Day: “As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise.” – Jerome F. Smith
