-- Posted Wednesday, 6 February 2013 | | Disqus

China replaced India sometime last year as the world’s largest consumer of gold and gold imports to mainland China from Hong Kong are presently running at more than twice the amount recorded a year ago.

According to data produced by Bloomberg gold imports from Hong Kong jumped by 94 per cent to 834.5 tonnes in 2012 with a monthly record of 114.4 tonnes in December. China is also the world’s largest gold producer but that has not been enough to satisfy its ravenous appetite for the yellow metal.

New gold champions

It was only a year ago that gold traders in the Sharjah Old Gold Souk told ArabianMoney that their biggest buyers were the Chinese looking to get out of the US dollar (click here). Gold is also a diversification against the risk that the Chinese economic miracle will one day run out of steam and local asset bubbles deflate.

We don’t really accept the argument offered by Bloomberg that the surge in gold consumption is simply down to the fact that the Chinese are getting wealthy. GDP growth is a fraction of the advance seen in gold consumption last year.

The Chinese read the same financial pages as everybody else and want to hedge against the rising risk of a bond market crash, just like many other investors. Their central bank has been pushing for gold to be included in a new IMF super-currency.

But they do appear to have been opportunist in taking advantage of the bargain gold prices available last year, with gold off its all-time high of $1,923 set back in October the previous year. The smart money has been moving into real assets (they are also buyers of Dubai property, for example) to diversify risk and the central bank will almost certainly emerge as the biggest buyer of gold.

Undercover buyers

Chinese gold buying is inscutable and often kept hidden for as long as possible. Bloomberg’s economists have done well to collate this data now to show this major change in global gold consumption.

Where do we go from here? Will the Chinese consumption of gold double again this year? Will it impact on the gold price? Well the trend is definitely up and not down and China is likely to get its first gold ETFs this year (click here).

As we have remarked before the advent of ETF investment for gold is likely to be big news for China’s 1.3 billion population. But as it happens gold imports have already doubled in advance of the gold ETFs.

-- Posted Wednesday, 6 February 2013 | Digg This Article

About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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