China's Love Affair With Gold By Gold Trading Forex Trading
One of the world’s biggest consumers of gold, China has a long-standing love affair with the precious metal. In addition to wealth, Chinese culture equates god with power, purity and beauty. A booming middle class and the lifting of a government-imposed ban on private citizens owning gold has made China the No. 1 gold market in the world. While the Chinese government does not release precise data, analysts believe China consumes about 40% of the gold that comes out of the ground every year. China has become the world’s largest gold mining nation, but its insatiable desire for the precious metal still exceeds domestic supply, and it is importing gold at unprecedented levels.
China Importing Gold at Record Levels
Most gold entering mainland China passes through Hong Kong, which does share its records. According to data from Hong Kong, gold imports increased over 700% from 2010 through 2015. Just over 100 tons of the precious metal passed through Hong Kong into China in 2010, with the total surging to just under 1,500 in 2013, and leveling off to around 1,000 in 2014 and 2015.
The increased imports result from efforts to satisfy China’s growing desire for gold. In the third quarter of 2015, demand for gold bars and coins increased 70%, and demand for gold jewelry rose 4% over the same period in the previous year. The highest monthly amount of gold ever imported, 217 tons, entered China from Hong Kong, Switzerland and the UK in December of 2016.
Chinese Government Lifts Gold Ownership Ban
The Chinese government has played a large role in the dramatic increase in demand for gold. In 2004, the government ended a ban outlawing private citizens in China from owning gold; the ban had been in place since 1950. Beginning in 2009, the Chinese government began heavily promoting the ownership of silver and gold to its citizens through a massive ad campaign launched on the main state-owned television company.
China’s Middle Class Is Booming
The rapid increase of China’s middle class has also given millions of Chinese more discretionary income. For the first time, China’s middle class is larger than the U.S. middle class and twice as many Chinese as Americans have joined the middle class since 2000. China has 109 million people with wealth between $50,000 and $500,000 compared to 92 million in the United States. Wealth per adult has also quadrupled in China to about $22,500 since 2000.
Gold Jewelry Market Vs. Gold Bar Investments
While around 80% of the Chinese gold market is in jewelry, the market dipped 1% in 2015 due in part to a slowing economy, dropping prices and Beijing’s anti-corruption efforts. Chinese investors tend to seek safety by increasing gold holdings in turbulent markets. Demand for gold bar investments rose by 20% in 2015 as stocks sank and currencies weakened. Chinese demand for gold bars and coins rose by a 20% to 201 tons in 2015 it but is still well below 2013's record levels, when investors purchased 407 tons. Demand for gold investments started strong in 2016, outpacing the jewelry market, as many expect the price of gold to continue to increase.
The Chinese Government’s Increased Transparency
Historically secretive about its government gold reserves, China has begun reporting its monthly gold holdings after repeated encouragement from the International Monetary Fund (IMF). China claims to have 1,700 tons of gold in its reserves, as of January 2016. While this represents a jump from December, many believe it is still far below the nation’s actual stockpile, which is likely close to 3,500 tons. Increasing its gold reserves allows China to diversify its reserves away from U.S. dollars and stabilize the value of the yuan by increasing confidence in its worth. As of January 2016, the U.S. has the largest gold reserves in the world with over 8,000 tons.
One of the world’s biggest consumers of gold, China has a long-standing love affair with the precious metal. In addition to wealth, Chinese culture equates god with power, purity and beauty. A booming middle class and the lifting of a government-imposed ban on private citizens owning gold has made China the No. 1 gold market in the world. While the Chinese government does not release precise data, analysts believe China consumes about 40% of the gold that comes out of the ground every year. China has become the world’s largest gold mining nation, but its insatiable desire for the precious metal still exceeds domestic supply, and it is importing gold at unprecedented levels.
China Importing Gold at Record Levels
Most gold entering mainland China passes through Hong Kong, which does share its records. According to data from Hong Kong, gold imports increased over 700% from 2010 through 2015. Just over 100 tons of the precious metal passed through Hong Kong into China in 2010, with the total surging to just under 1,500 in 2013, and leveling off to around 1,000 in 2014 and 2015.
The increased imports result from efforts to satisfy China’s growing desire for gold. In the third quarter of 2015, demand for gold bars and coins increased 70%, and demand for gold jewelry rose 4% over the same period in the previous year. The highest monthly amount of gold ever imported, 217 tons, entered China from Hong Kong, Switzerland and the UK in December of 2016.
Chinese Government Lifts Gold Ownership Ban
The Chinese government has played a large role in the dramatic increase in demand for gold. In 2004, the government ended a ban outlawing private citizens in China from owning gold; the ban had been in place since 1950. Beginning in 2009, the Chinese government began heavily promoting the ownership of silver and gold to its citizens through a massive ad campaign launched on the main state-owned television company.
China’s Middle Class Is Booming
The rapid increase of China’s middle class has also given millions of Chinese more discretionary income. For the first time, China’s middle class is larger than the U.S. middle class and twice as many Chinese as Americans have joined the middle class since 2000. China has 109 million people with wealth between $50,000 and $500,000 compared to 92 million in the United States. Wealth per adult has also quadrupled in China to about $22,500 since 2000.
Gold Jewelry Market Vs. Gold Bar Investments
While around 80% of the Chinese gold market is in jewelry, the market dipped 1% in 2015 due in part to a slowing economy, dropping prices and Beijing’s anti-corruption efforts. Chinese investors tend to seek safety by increasing gold holdings in turbulent markets. Demand for gold bar investments rose by 20% in 2015 as stocks sank and currencies weakened. Chinese demand for gold bars and coins rose by a 20% to 201 tons in 2015 it but is still well below 2013's record levels, when investors purchased 407 tons. Demand for gold investments started strong in 2016, outpacing the jewelry market, as many expect the price of gold to continue to increase.
The Chinese Government’s Increased Transparency
Historically secretive about its government gold reserves, China has begun reporting its monthly gold holdings after repeated encouragement from the International Monetary Fund (IMF). China claims to have 1,700 tons of gold in its reserves, as of January 2016. While this represents a jump from December, many believe it is still far below the nation’s actual stockpile, which is likely close to 3,500 tons. Increasing its gold reserves allows China to diversify its reserves away from U.S. dollars and stabilize the value of the yuan by increasing confidence in its worth. As of January 2016, the U.S. has the largest gold reserves in the world with over 8,000 tons.
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