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Private Chinese demand
for gold has leapt ahead of economic growth...
ONE MAN'S
investor is, apparently, another's middle-aged housekeeping auntie in China.
"Yang Cuiyan," says Bloomberg, "a
41-year-old housekeeper from Anhui province, is one reason China
is poised to topple India as the world's top consumer of gold, even as investors
desert the metal."
Yes, of course the sub-editors got to this article. Yes, we should never take
such "slice-of-life" reporting as anything serious.
But that distinction, between the middle-aged Chinese "auntie" (as
women of Yang's age are apparently known) and the "investor" smacks
loudly of a West-centric view.
Clearly, she's dumb to buy jewelry in the hope of
retaining her savings when investors here in the West are
"deserting" precious metals. Nevermind
that Yang, and the army of Chinese aunties, is an investor herself. Nevermind that, buying only an ounce each (as she has),
that army of 120 million Chinese women in their 40s today (the prime age for
China's stereotypical "goldbug" according
to brokerage Nomura, although it says he's male and buys at his bank) would
outweigh the 2013 sales from Western ETF contracts five times over.
And nevermind
that the world's still-fastest growing major economy
is now the world's No.1 private gold buyer too, finally overtaking India in
2013.
Of course, that army of
aunties doesn't have the cash to purchase one ounce each at will. Nor will
they all choose to buy gold, let alone all at once. But unlike here in the
West, precious metals are not a minority sport in China today. And as our
friend Marcus Grubb at the World Gold Council notes in this
interview, the 2013 slowdown in China's economic growth has NOT seen a
slowdown in China's gold demand.
It's been a while since
we looked at China's gold demand in depth, or the share of
China's household savings going to gold. But as our chart above shows,
after the 2011 surge, there was indeed something of a 2012 gold panic
in China. Consumer demand only grew greater this year, pulling the gross
spend on jewelry, coins, investment bars and gold
trinkets some 18% higher over the first 9 months of the year in Yuan terms.
No, you don't need to
misread the available, well-established and rigorous data to reach some
startling conclusions. Based on the World Gold Council's numbers, produced by
the GFMS consultancy (now part of Thomson Reuters), private consumer spending
on gold, in Yuan terms, has risen up to 18 times over in the last decade.
Crunching the numbers today, we reckon 0.8% of China's entire GDP was spent
by private households on physical gold in the first quarter �– which
includes the peak seasonal demand of lunar New Year �– of both 2012 and
2013.
Whether for jewelry, bars or coin, it's very hard �–
and very old-skool colonial �– to deny the
investment motive in that world-beating demand today. But one man's investor
is another's housekeeping auntie. Making it all the easier to dismiss the
countless decisions to acquire gold made by households in the hardest-saving
and fastest-growing big economy.
Adrian Ash
Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market
for private investors online, where you can fully allocated bullion already
vaulted in your choice of London, New York, Singapore, Toronto or Zurich for
just 0.5% commission.
Please Note: This article is to inform your
thinking, not lead it. Only you can decide the best place for your money, and
any decision you make will put your money at risk. Information or data
included here may have already been overtaken by events �– and must be
verified elsewhere �– should you choose to act
on it.
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