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Chinese Snapping Up Gold

Chinese Snapping Up Gold

You’ve got to hand it to the Chinese, they know how to play the ups and downs of any market. As you know, gold prices are always on a rollercoaster ride, which in no way detracts from its long-term appeal. The gold merchants of Hong Kong appear to be piling back into the market right now, according to the Wall Street Journal.

Chinese purchases of gold are surging, and the buying coincides with favorable prices, the rush of year-end marriages in China, and in preparation for the Lunar New Year next month. Gold is a favorite gift for these occasions, and gold buying by the Chinese is always big news, since they account for 30 percent of global demand for gold.

One Hong Kong gold retailer has reported its gold sales have risen by 20 to 25 percent in the last month. While gold jewelry always plays a prominent role in Chinese buying habits, don’t overlook the fact that Chinese grandparents customarily give gold bars as gifts for their grandchildren.

In fact, the Chinese demand for gold has shot up so much recently that the country’s banks have added a $30/ounce surcharge for customers seeking fast delivery of their gold purchases. That’s the highest surcharge premium in three years.

A lot of buying stems from fear about uncertain times ahead as well as an opportune time to buy. The biggest demand seems to be for one-kilogram bars of gold, but smaller bars are also sought after. Many Chinese invest in gold when they perceive that Asian currencies will weaken against the U.S. dollar. The dollar has strengthened recently on expectations that President-elect Trump will stimulate the economy and cause interest rates to rise.

The Chinese currency, the yuan, has already weakened, creating demand by new investors to hedge their wealth with gold. Further demand is being spurred by rumors that the Chinese government may limit gold imports in order to reduce the outflow of yuan, which is used to pay for the gold imports. China could do this to protect its foreign-exchange reserves.

In the last few days, Chinese regulators have told banks to cut the amount of capital that Chinese companies can move offshore and into international operations. Clearly, something is afoot with gold in China, and we should pay attention. That could mean opening an Augusta™ Gold IRA or making additional gold purchases for an existing Augusta Gold IRA. Gold is a long-term investment, and it makes sense to buy on the dips. Just ask the Chinese.

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