China steps up gold purchases

Written By , on January 18, 2012

Diane Alter – AHN News Reporter

New York, NY, United States (AHN) – China’s appetite for gold is glowing, glistening and growing. Shipments of the yellow metal to the Mainland have soared, giving gold prices a boost after a steep drop in December.

The Chinese have been backing up the truck and loading up on gold ahead on the Lunar New Year, which falls on Jan. 23. The New Year in China is a heavy on gift giving in which the older generations shower the younger generations with money. And, as the Chinese have grown wealthier, gold, in the form of jewelry, coins and bars, is now the preferred presented and received gift.

Shipments from Hong Kong to mainland China totaled a whopping 102 tons, a 20 percent increase from October, and was nearly a sixfold increase from November.

The increase was good enough to push gold prices up 6 percent to date in 2012. It also signifies to gold bulls that the bounce in gold prices is more than simply a technical bounce from December’s steep sell-off.

Spurring gold demand in China are purchases from young shoppers who fear the threat of inflation. Younger buyers view the precious metal as an easy investment in that it is “less complicated and less risky” than other asset classes, according to some.

Shoppers are not simply buying gold jewelry, they are purchasing gold coins and bars, wanting to have something tangible and of certain value.

Experts warn that if China’s infatuation with gold wanes, it could weigh on gold prices. As analysts have noted, a sustainable turnaround in gold would not be justified without some real fundamental backing, and China continues to grow more important in that regard and is a prominent presence in that picture.

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