Gold News

Chinese "Still Bullish" on Buying Gold

INVESTORS  Buying Gold in China remain bullish – with physical demand likely to continue supporting the Gold Price – according to a report published this week by a leading precious metals consultancy.

The economic backdrop for Buying Gold remains "generally very positive", argues Junlu Liang, metals analyst at Thomson Reuters GFMS.

The report cites a growing economy, an expanding network of jewelers and rising inflation as factors supportive of Chinese gold demand in recent years.

"There can be little argument that the rise in disposal incomes is an important driver of jewelry demand," the report says.

"Further support [has come] from ongoing infrastructure developments in smaller cities...[which have] allowed major jewelry retailers to expand their businesses in smaller cities at a very rapid pace, with each new store requiring some 'start-up' inventory."

The report also notes many people are Buying Gold "for wealth preservation and as an alternative asset diversification option" – an idea covered by a recent World Gold Council report.

Those who are Buying Gold for the long term have not been put off by recent falls in the metal's price, the report says.

"While the sharp fall in Gold Prices in late September triggered heavy selling from more speculative investors in China, demand for physical gold has stayed at elevated levels," it says.

"With the underlying bullish sentiment towards gold remaining in place, we expect demand for jewelry and bars in China to continue growing over the rest of 2011, which will undoubtedly provide tremendous support for the Gold Price."

Recent months have seen a big rise in the number of Chinese Buying Gold in more traditional investment forms. China saw a 44% year-on-year increase in gold bar and coin demand in the year to Q2 2011, according to data published by the World Gold Council.

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