China is Buying Gold

China has surpassed India as the World's biggest Gold consumer, and these 2 countries remain the biggest growth drivers.

According to the World Gold Council, there's a "huge wave of Gold demand coming" mainly from emerging markets.

 

Similar to India, Gold has a special appeal to Chinese people as it represents luck and fortune. Apart from traditional beliefs, heightening inflation pressure in China has also increased Gold's demand as a hedge against inflation.

 

China's headline inflation rose to +5.5% Y-Y in May after moderating to +5.3% a month ago. Core inflation was also +2.9% Y-Y, up from +2.7% in April.

China is the World's 6th largest Gold holder in terms of total amount, and at 1054.1 tons, it only takes up 1.6% of the total reserves.

 

The Chinese government realized the need of increasing Gold reserves. In the 2010 International Financial Market Report released in March, the PBOC expressed positive views on Gold demand and signaled that investment demand will be supported by inflation and geo-political uncertainties.

 

Further, industry experts are saying that persistent sovereign debt problems in the European periphery should boost Gold purchases.

 

Zhang Bingnan, secretary-general of the China Gold Association, said the government's Gold reserves are 'far from enough', and 'demand for Gold, mostly driven by investment, will grow at least 20% annually Thus,.enthusiasm for Gold as an investment will get Stronger, and domestic sales in this area will keep doubling over the next 2 yrs.

 

Paul A. Ebeling, Jnr.

 

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

 

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.