Demand for gold in China is surging despite slower economic growth.
China surpassed India by purchasing 798 tonnes of gold this year. Urbanization and rising wealth are driving demands as Chinese consumers show no sign of curbing their spending habits. More and more people are investing in higher carat and heavier pieces of gold jewelry since gold is a secure haven of wealth and protection against inflation. However, this is simply promoting “gold hoarding”, predominantly by women, since Chinese “aunties” lead the charge, depleting inventories of jewelry stores.
However, China’s hunger for gold triggered speculation about reserves. Investment analysts are suspicious that the Chinese government are increasing their gold holdings as part of their foreign reserves since the Chinese government rarely releases comprehensive data on gold imports or holdings. Also, the main conduit for gold to China is gold imports into Hong Kong, therefore gold prices notably rose an average of 10% yearly over the past decade.
Hong Kong Bullion Imports vs. Gold Prices, 2008-2013
In the future, since demand will exceed the gold supply, I predict that the price of gold will skyrocket even further. Just like the gold smuggling that resulted in India after the new tax was imposed on gold from 4% to 8%, I believe that it may possibly occur in China also.
Source: http://money.cnn.com/2013/11/15/news/economy/china-gold/index.html?iid=SF_BN_River
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