Chinese people rush to gold amid uncertain economy, crisis-ridden real estate market
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People in China have been turning to gold despite rising prices as the precious metal is deemed the best safe haven asset amid economic uncertainties and a crisis-hit property sector.
Prices of the yellow metal have gained about 11% in the year to date, Business Insider reported.
Despite this, Caibai, a renowned jewelry store in Beijing, China, has seen more and more customers, many of whom have no great wealth and only modest savings, buying gold as a way to safeguard their wealth amid economic uncertainties, as reported by French newspaper Le Monde.
As China struggles to recover from several years of pandemic and reels from a property sector in crisis, gold remains the best safe haven asset for its citizens.
“It’s reliable. People think it’s the best investment. There was also real estate and the stock market, but today people are hesitant, whereas gold has continued to rise,” Wang Anmei, a salesman at Caibai, explained.
The demand for safe havens has pushed China’s gold consumption up 5.94% from a year earlier to 308.91 tons in the first quarter of 2024, according to data from the China Gold Association cited by state-owned daily newspaper China Daily.
The gold rush is not only seen among people in China, but its central bank has also been snapping up the precious metal.
According to industry association World Gold Council, the People’s Bank of China (PBOC) purchased 225 tons of gold in 2023, the most for a single year since at least 1977.
This also makes PBOC the world’s largest institutional buyer of gold, the association said.
The central bank had been snapping up the yellow metal for 18 straight months before pausing last month when spot gold prices hit a record high of $2,449.89 per ounce, official data showed on Friday.
It had actually started to slow purchases in April, when it bought just 1.87 tons of the precious metal, down from 4.98 in March and 12.1 in February.
Nonetheless, industry players said that they are expected to resume buying yellow metal once prices ease.
“They are just waiting and watching. If prices correct to the US$2,200 per ounce level, they will resume again,” David Tait, CEO of the World Gold Council (WGC), told Reuters.
Questions & Answers
Q.Why are Chinese people increasingly buying gold despite rising prices?
Why are Chinese people increasingly buying gold despite rising prices?
People are turning to gold as it is seen as the best safe haven asset amid economic uncertainties and a crisis-hit property sector in China. Many view it as a reliable investment to safeguard their wealth.
Q.Has the increased demand for gold been reflected in consumption figures?
Has the increased demand for gold been reflected in consumption figures?
Yes, China's gold consumption rose by 5.94% from a year earlier to 308.91 tons in the first quarter of 2024. This data comes from the China Gold Association.
Q.Has China's central bank also been purchasing gold recently?
Has China's central bank also been purchasing gold recently?
Yes, the People’s Bank of China (PBOC) bought 225 tons of gold in 2023, making it the world’s largest institutional buyer. It had purchased gold for 18 straight months before pausing last month.
Q.What is the expected future gold purchasing behaviour of China's central bank?
What is the expected future gold purchasing behaviour of China's central bank?
Industry players anticipate the PBOC will resume buying yellow metal once prices ease. The CEO of the WGC suggested they might re-enter the market if prices correct to the US$2,200 per ounce level.
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