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China Going Crazy for Gold

April 29, 2013 - A significant determinant in the gold market is foreign demand, stipulated heavily by China and India, the world’s two largest gold markets traditionally. On the recent price drop, Asian markets have been on a gold-buying spree with reports surfacing of seven hour waits at physical gold bullion dealers in Hong Kong, seven week waits for deliveries from the U.S. Mint to Asia, and levels of business not observed by fifty year veterans of the market.

The Chinese mainland has been the most enthusiastic buyer of gold in Asia, with imports from Hong Kong increasing by 1,000 metric tons just two weeks ago. Chinese buying emptied reserves of gold dealers in their own country, with lines of thirty people observed out the door of Beijing’s largest gold merchant, Caibai, on April 19th. Retailers in Guangzhou ran out of stock as the China Gold Association reported retail gold sales tripling across China on the 15th and 16th of April.

Trading volume surged on the Shanghai Gold Exchange, long-considered a proxy for the metal’s demand in China with consecutive records set on the 19th and 22nd of 30.4 metric tons and 43.3 metric tons respectively. These literally shattered the prior record or 22.0 tons, which was set on February 18 of this year.

Following the emptying of store shelves on the mainland, buyers then went south, sometimes in groups, to swarm the shops in Hong Kong. Chow Tai Fook, the world’s largest jeweler by market capitalization, reported stores popular with mainlanders running out of gold bars with demand not seen since the late 1980s.

Behind the recent buying spree, Forbes reports the Chinese are taking advantage of the recent dip in prices, which is the most significant since 1983. However, the Chinese continued buying as the gold market recovered from the losses.

Recent economic weakness in China was interpreted when the Chinese National Bureau of Statistics reported that Q1 GDP growth came in at 7.7 percent, far under the estimates of 8.0 percent, which was partially to account for the drop in gold prices as the report surfaced on the 15th.

Forbes reports that aside from North Korea, China has become the most fragile economy in East Asia at the current time, with economic concerns evident throughout the Chinese society.

The Chinese, considering the fragile status of their economy, are stockpiling gold bullion.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer -

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