Chinese investors driving gold prices higher

Record high gold prices have barely dampened the enthusiasm of chinese gold investors in August. Chinese jewellery retailers reported that gold purchases grew by up to 30 per cent compared to the same period of the previous year. Besides physical gold purchases, a rising number of local investors have put their capital in gold derivatives. 

Although many Chinese traditionally prefer to buy physical gold in the form of coins, bars or jewellery for investment purposes, the country's banks started offering a wide range of new paper gold products, which are drawing in many Chinese investors with high risk tolerance to the local futures and options markets.

Chinese investors seem to have forgotten the Hang Seng Index crash in 2008, when Hong Kong´s benchmark index lost about 70 per cent of its value, and are rushing to speculate again. Investors who want to bet on rising gold prices can do so at the Shanghai Gold Exchange (SGE) and Shanghai Futures Exchange. China´s rapidly expanding paper gold markets offer a wide range of products to local investors.

The volume of the most actively traded gold contract on the SGE soared to a record high of 350,670 grams in August as fast earned cash entices more Chinese investors to jump on the bandwagon reinforcing the trend