China’s gold fever

Rising price threatens to break China’s gold fever
http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/rising-price-threatens-to-break-chinas-gold-fever/article1998978/

CAROLYNNE WHEELER
BEIJING— Globe and Mail Blog
Posted on Tuesday, April 26, 2011 9:50AM EDT

As the price of gold dipped slightly below $1,500 an ounce on Tuesday, there was a sudden surge in the lunchtime crowd in one of Beijing’s largest gold markets.

“In bad times, we buy gold,” said Wang Heping, 39, as he examined a collection of gold and silver desk ornaments in a glittering hall in the Caibai New Century department store, in west Beijing. “I think it’s better than depositing it in the bank.”

It’s a hard time for saving money in China.

The country’s stock markets are volatile, and now new government controls are restricting property sales, another traditional target for investment, in hope of driving out speculators.

What’s left, increasingly, is gold, as middle and upper-class Chinese try to protect their savings from inflation hovering around 5 per cent.

China’s consumers bought 400 tonnes of gold jewellery in 2010, a new annual record that made the country the second-largest market in the world after India, and the growth in investment demand was the strongest anywhere in the world, up 70 per cent to nearly 180 tonnes of gold bars and coins.

The trend is expected to continue this year, according to the World Gold Council, which tracks such statistics.

“People have to park their wealth somewhere,” said Albert Cheng, the Council’s managing director for the Far East. “It boils down to one thing: Chinese always look to gold as a means of preservation of wealth.”

But the climbing price of gold -- some analysts suggest it could go as high as $1,650 an ounce in coming weeks -- have left a few would-be buyers a little bewildered.

Li Chao, 42, a businessman browsing a display of engraved gold bars and solid gold rabbits honouring this year’s Chinese zodiac at Caibai, paused when asked what the best protection against inflation is now.

“Housing’s out. I wouldn’t invest in housing now. And gold is getting expensive because people are buying like crazy…I have stock investments, yes, but of course I’m worried about them,” he said.

“People’s fear is driving them to buy now,” he continued. “People’s investment channels are narrow and they want to save money, so they buy gold.”

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