MERCHANDISER
RECORD GOLD PRICES, rather than denting enthusiasm for bullion, have emboldened investors to plough more money into gold bars and riskier bullion- based derivatives – especially in China. August is traditionally a slow month for Chinese jewellers, but many shops in Shanghai visited by Reuters reported surprisingly solid gold sales over recent weeks, with shoppers unphased by gold’s stellar price gains over the past few months. “The surge in prices has sparked
Record Prices Spawn New Wave of Gold Buyers Expectations that gold will extend
its bull run have also encouraged investors into the country’s nascent gold derivatives markets, such as the forward and futures contracts on the Shanghai Gold Exchange and Shanghai Futures Exchange. Volumes for SGE’s most popular gold
another gold-buying craze. The 50 gram and 100 gram gold bars were selling like hot cakes,” said Ms. Liu, a store manager at Shanghai jeweller Lao Feng Xiang Co Ltd , who said gold sales last month were up at least 30% from a year ago. The attitude of Chinese consumers – expected to soon overtake Indians as the world’s top buyers of gold – will be an important influence on longer-term trends.
Buying On Dips That demand may also help smooth
out temporary drops in prices. As we write, spot gold has come off its record highs of over $1,900/oz, but such dips appear only to embolden consumers. “Many Chinese investors and consumers see price corrections as buying opportunities. The view that gold is an enduring store of value is firmly rooted in Chinese cultural traditions,” said Hou Xingqiang, a gold analyst at Jinrui Futures. “Gold’s rally over the past two years
and the debt worries in the West have only strengthened Chinese investors’ belief that they need to own the metal as an investment asset.” There is no shortage of bulls on Wall Street forecasting even higher gold prices, with JPMorgan predicting at least $2,500 an ounce by the end of the year. Amid the gold frenzy, China’s banks
and brokerages have been quick to offer paper gold investments to cash in on the trend. Trade sources at the Bank of China and Industrial and Commercial Bank of China say demand for their gold linked savings products has soared, while a growing army of retail investors are also eager to dive into the paper gold market.
forward contract hit a record high of 350,670 grams in August – double the volume in July. “More investors are moving into paper gold because of the lower capital costs,” said He Wei, a gold analyst at Nanhua Futures. While the government is taking a somewhat cautious approach, people’s
thirst for new investment products will no doubt accelerate China’s opening up of the gold sector – a move long awaited by foreign banks. The China Banking Regulatory
Commission has already granted membership to two foreign banks to trade gold futures on the Shanghai Futures Exchange. Industry watchers said changes on the horizon include night trading for the SHFE’s gold contracts and expanding the list of domestic banks allowed to import gold – a big step towards a full liberalisation of the sector. Reuters – for Commodities Now
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