China Economy Shines Brightly in China’s Golden Year
Gold Shines Brightly in China’s Golden Year
China’s consumers are going for the gold in unprecedented numbers. The nation’s retail demand for gold rose strongly in the fourth quarter of 2009 according to new figures from the World Gold Council.
While consumers in many developed countries cut back on luxury purchases due to the recession, Chinese consumers signaled once again their growing sense of wealth and confidence. The Gold Council reports that China’s consumer demand is up 3 percent from a year ago to 116.3 tons in the last quarter of 2009 on the Chinese mainland, in Hong Kong and on the island of Taiwan. Total consumer demand for gold in greater China grew by 7 percent to 461.9 tons during all of 2009.
A great deal of jewelry demand came from wedding purchases according to the Gold Council. But the current “Year of the Tiger” is considered to be unlucky for marriage so now is probably not the time to take a position among large gold jewelry retailers like Fuqi (FUQI).
Many Chinese people would have chosen to get married in December and January rather than in the Lunar New Year. The Chinese call the Year of the Tiger a “widow year.”
Gold is also shining as an investment in many Chinese portfolios. Retail investment in bars and coins grew by 17 percent year over year during the fourth quarter. Retail investment demand was reported to be strong throughout 2009, as more investors turned to the base metals as prices rose, and inflation became a concern in China’s hot economy.
The Gold Council reports that demand for physical gold investment products experienced strong momentum, with both banks and bullion dealers reporting solid demand.
The World Gold Council predicts that gold sales will maintain their momentum in China unless prices rise above $1,200 an ounce in this price-sensitive market.
On the IMF question, we still have no confirmation of the report from a Moscow-based website that China had “confirmed its decision to acquire 191 tons of gold to be auctioned by the International Monetary Fund.” China previously indicated that it was not interested in purchasing the IMF hoard.
Speculation will not be helpful in this case. On one hand China produces enormous amounts of gold in its own mines and has no urgent need for the IMF stockpile. On the other hand China is interested in diversifying its reserves away from U.S. dollars and would be unlikely to tip its hand and indicate its interest, thereby potentially raising the price at auction.
