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Chinese Catch the Gold Bug

May 20, 2010

In a previous post, I mentioned a CCTV News report that China is seeing a recent surge of gold buying, as local investors nervous over a possible property bubble look for an alternative place to stash their cash.  Here are the links to that report, both in text and video form.  You can also watch my comments on the report here.

According to CCTV, sales of gold for the May Day holiday in Beijing are up 70% over last year, and that sales of gold bars has doubled.  It notes that May is a popular season for weddings, which makes it a peak gold-buying period, but attributes this year’s increase to jitters over property prices:

Mr. Zhang had planned to invest his money in the property market. But on second thought, he changed his mind . . . [Zhang] said, “The recent measures have been reining in tightly. So I changed my investment plan. I believe the gold market is more stable. It could also avoid investment risks and prevent the threat of the inflation.”

Another CCTV report this Tuesday suggests the shift towards gold is not limited to Beijingers, but also includes investors from Wenzhou, a southeast coastal city famous for its itinerant entrepreneurs:

Housing speculators from Wenzhou City in southeastern China are switching their money from property into gold following government restrictions on the real estate market  Tao Xingyi, president of Beijing-based Jinding Group, a company specializing in high-end gold trading and investment, said the company’s customers have increased by 300 — 400 percent recently . . . Tao said that within one month, three groups of Wenzhou investors made purchases of gold from his company worth more than 10 million yuan.

I have no way of verifying these reports, but as I mentioned in my televised comments, I find it very interesting given the analogy I’ve always drawn between the way Chinese invest in empty apartments as a “store of value” and investment in non-productive assets like gold.  So it might very well make sense that, if they are no longer so certain stockpiled real estate will act as a reliable store of value, they would opt for gold as an attractive alternative.

I was back on CCTV’s BizAsia program on Tuesday, talking about three topics: 

  • the reason investors continued to hammer the Euro this week, and why the crisis in Europe is taking such a toll on Asian markets;
  • interpreting the latest news that China has increased its holdings of US Treasuries;
  • what effect are the government’s recent cooling measures having on China’s property markets, and what further actions can we expect to see?

You can watch a mini-clip of my comments on China’s US Treasury holdings here.  For the others, you’ll have to check out the video of the complete program here.

4 Comments leave one →
  1. Jay permalink
    May 21, 2010 1:52 am

    I myself have no clue how to value gold which really has no use other than it has been used as money until the 70s. I have a feeling gold will crash some day.

  2. dannytchii permalink
    May 23, 2010 3:18 pm

    My mother-in-law used to tell me a story while escaping communist overrun on KMT in 1947,
    although she had stash of gold, but always hungry…, “gold is worthless compared with rice,
    and food in time of turbulence…”, she said. Existence, to many, is ephemeral, holding on
    something permanent is vital, gold becomes a good subusitute, she still keeps this habit thru
    all these years.

    Will these habits become unerasable genes ?


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