Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

China's Gold Demand Explodes

Commodities / Gold and Silver 2010 Dec 03, 2010 - 09:54 AM GMT

By: Julian_DW_Phillips

Commodities

Best Financial Markets Analysis ArticleChinese demand is behaving as we predicted. If you look at the recent history of Chinese gold demand, you start in 2003 when gold ownership was acceptable, having been banned from 1945 until then. This occurred at a time when the agency for the People's Bank of China began buying gold for their reserves. Prior to that, HSBC tried to persuade China to buy gold, but the time was not quite right for them. Now it is very right for China to buy gold. What has happened since 2003 and during 2010?


The growth of the Chinese gold markets

Once allowable, gold ownership was, hesitatingly, encouraged. But first, as with so many areas of finance in China, the embracing of the western financial system had to be tempered with the development of skills and structures to handle the changes. In gold's case, the Shanghai gold market had to be instituted, the banking system's gold distribution had to be established, all of which has taken since 20003 to bring a sufficiently capable system to their gold markets. In the last year, we have seen the Chinese government issue permits to import gold into the country by a much larger number of banks and importers. The Chinese gold distribution system has still a long way to go, in line with the development of the country overall. Gradually, the distribution system for gold was slowly developed, fist in the main centers for the newly wealthy, then through the select top five Chinese banks and their main centre outlets. All the banks are now allowed to distribute gold and slowly, it will reach the western outer reaches of China as the country develops.

Growth out of the growth of China itself

China's development, as we all know, began with the export of cheap parts sub-contracted out of the developed world, then moved onto exports of their own. The south-east and mid-east benefited first with infrastructural development fanning out from there. Now infrastructural development is reaching into all other parts of the nation at break-neck speed. With this development comes a new middle class of hard working people earning small proportions of what they could in the developed world, but saving up to 40 % of their income. Now this middle class is growing explosively alongside the overall development of the nation. Until recently they held their savings in bank deposits, which is why when interest rates go up, Chinese middle class disposable income rises with them. For good reasons, the government has realized that China, as a whole, will benefit from its citizens owning gold as well as the central bank, the People's Bank of China. Hence, they are actively encouraging the Chinese people to buy gold, as are the banks. The Chinese have memories of how gold is real money. They are buying it because it is seen as true wealth in all seasons. They don't buy it simply as a hedge against inflation, but because it will weather all sorts of financial ails.

Chinese central bank gold buying

In addition, the government published two years ago that the People's Bank of China had added 400 tonnes to its reserves. It became clear that another government agency was acquiring this gold over the previous five year period for the central bank. We are of the opinion that the same agency continues to acquire gold for the central bank. This will only be disclosed when [likely in another three years - every five years] it suits the government to disclose it. However, we now realize that it may well be a mistake to think that the 400 tonnes acquired over the five years prior to 2008 was acquired at an even rate. This amount could well have been the buying of rising local production over those years. After all as the Chinese themselves have said, buying on the international market can be difficult without forcing the gold prices up [it can be done on a 'limit' order basis, accepting offers only, without chasing prices]. It makes far more sense to buy local production from local producers 'off' market.

We are aware that the government is still buying in the international market as well as local production but it is impossible to discern what amounts, without the government supplying that information. More than that, it is very difficult to discern what the government is buying and what the Chinese jewelry and investment trade is taking. With local production of 340 tonnes this year and imports set to be around 280 tonnes for the year, with an unknown amount perhaps stored in Hong Kong vaults for the government agency, we do know that China is taking at least 620 tonnes in total in 2010. But what will happen in the Chinese gold market in 2011 and beyond and what will that do to the gold price?

Gold Forecaster regularly covers all fundamental and Technical aspects of the gold price in the weekly newsletter. To subscribe, please visit www.GoldForecaster.com

By Julian D. W. Phillips
Gold-Authentic Money

Copyright 2009 Authentic Money. All Rights Reserved.
Julian Phillips - was receiving his qualifications to join the London Stock Exchange. He was already deeply immersed in the currency turmoil engulfing world in 1970 and the Institutional Gold Markets, and writing for magazines such as "Accountancy" and the "International Currency Review" He still writes for the ICR.

What is Gold-Authentic Money all about ? Our business is GOLD! Whether it be trends, charts, reports or other factors that have bearing on the price of gold, our aim is to enable you to understand and profit from the Gold Market.

Disclaimer - This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold-Authentic Money / Julian D. W. Phillips, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold-Authentic Money / Julian D. W. Phillips make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold-Authentic Money / Julian D. W. Phillips only and are subject to change without notice.

Julian DW Phillips Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in