Growing demand for investment in gold in China
The demand for gold increased in the last one year by 16% globally and a total of $59.7 billion has been spent on gold by investors. Gold investment was mainly boosted by investment from China, which increased by 10 percent.
The demand for gold was 1,098 tonnes in the first quarter of the year 2012, which was 5 percent above the record high as compared to 2011. According to the reports released on gold, demand trends for gold dropped in the first quarter in 2012. China is expected to be one of the biggest markets for Gold, where the demand for gold jewellery increased by 8% and the market share of demand was 30% of the global demand in gold jewellery.
The total investment for retail and institutional investors who bought ETFs was valued at $2.4 billion (51.4 tonnes of gold), which was purchased in the initial 3 months of the year. Although the demand for gold in China is increasing, the demand for gold in the neighbouring country India, has decreased. The demand for gold jewellery in India fell by 19% and the demand in investments fell by 46%. However, it is believed that demand may increase as the government abolishes taxes on gold.
Increasing Gold Investments in China
There are many reasons for increasing investments in gold in China, which includes the following -
- Poor European market performance – The trend of investments in Gold is driven by the poor performance of European markets and Europe’s debt crisis, which resulted in weakening currencies.
- Gold gains during the crisis – Gold is expected to gain for the 12th consecutive year in 2012 because the European policymakers want to avoid the breakup of the Euro Zone. The investors holding on to their share in gold mainly use it to avert risk, especially due to the rising risk of the financial crisis.
- Poor global equity market performance – Investors are looking towards gold due to the poor performance of global equity markets.
- Value of money is reduced – Since the value of money is decreasing due to excessive money printing , it is important for government investors, individuals and institutional investors to hold on to gold.
- Increasing demand for gold jewellery – It is mostly China’s middle class that is keen to invest in Gold. They are the biggest consumers in metal this year, and the experts believe the trend will continue to rise because at least 25% of the total population in China will be middle class by 2020. The growing middle class seeks to invest in luxury items and Chinese consumers will be responsible for 44% of the global sales of consumer goods. Chinese buyers have been demanding for retail jewellers to open shops in various cities and to expand in China to meet the increasing demand for gold.
- Amazingly, the trend for accumulating expensive metals is spreading from the main cities of China to third tier cities which will further increase the demand for gold.
- China’s growing market for gold – China is a growing economy and its growth rate is expected to surpass the growth of western developed economies. China will become one of the largest markets for gold in 2012 and buying in gold will further be aided by the central banks that have been using gold as a diversifier as well as a safe source to secure the country’s wealth.
- Gold investments reduce uncertainties / dollar pressure – Furthermore, stronger pressure on the dollar may raise the demand for gold. Investors claim they are optimistic of gold investments in the long term because there are too many uncertainties in the overall global market in the form of political , economical and financial uncertainties. The imports of gold in China from Hong Kong rose by 65% to 103.6 tons in the month of April in 2012 (as per the records of Census and Statistics Department of the Hong Kong Government).
- Investors are avoiding property investments – Investors from China are avoiding property investment to prevent risk of investing in a property market bubble. However, Gold is an alternative safe investment and the demand for Gold is further expected to increase due to growing demand in China’s middle class.
– by Samantha Taylor