Familiar yet alien at once, China's surging demand for gold seems more than a craze...

 

LAST TIME I was in Hong Kong, I spotted what seemed to be a UFO craze, writes Adrian Ash at BullionVault.

 

News-stands, billboards, flyposters, TV news...I could only guess at the details, but the images of flying saucers were far from alien. Britain, like the US, has enjoyed its own UFO crazes often enough. Science fiction was a fact of my childhood, Close Encounters, crop circles and all.

 

So Hong Kong's UFO fixation felt oddly familiar. Odd because it was so out of sync. Or rather, it put me out of step. Here was a mini-mania both recognizable yet utterly foreign at once.

 

UFO sightings in the UK, as in the US and Europe, still make the news today of course. But instead of panic or fascination, the tone towards UFOs is now knowing, almost weary. Sightings are dismissed with a smile by TV anchors. They're just Chinese lanterns released from a party, or high-altitude balloons released by kids. Crop circles were a cider-fuelled hoax. And alien abductees simply give documentary-makers someone to mock.

 

Hong Kong's little deluge of UFO images, in contrast, plus adverts for meetings and seminars, made what little I saw feel like a real invasion – a true event in popular culture, if not in scientific fact. A November 2012 conference in the city set a world record for UFO conventions, with 1,700 attendees. Via the magic-science of the internet, I see modern China has long had UFO crazes, and the media take them very seriously. The authorities apparently approve scientific study by PhD specialists. Which brings us to gold.

 

China's gold demand isn't quite like anything analysts or traders have seen before. Familiar from India's long-standing love, its speed and growth are new in just the same wayt as an '80s-style UFO craze isn't.

 

The volume of metal being hoovered up in the world's second largest economy is staggering. More than 1,000 tonnes of gold was delivered through the Shanghai Gold Exchange in the first half of 2013, more than the whole-year total in 2012. Premiums over international benchmarks have slipped back, but only from historic records as wholesalers continue to chase supplies. And as Swiss bank (and major bullion dealer) UBS notes, Chinese banks are only widening access for private households still further, expanding the millions of gold savers with new retail products.

 

Now, whether this is a "mania" or investing craze depends on whether it twinkles, fades and then vanishes – only to be revealed as a trick of the light. There's plenty of amateur UFO-ology on the internet to hoax Western gold and silver investors, too. And it's crucial to note that this 2013 gear-change in China's gold demand only took place after the initial phase of this spring's price crash. The surge wasn't there at $1500 or $1600 the ounce.

 

Still, like a very scary flying saucer, China's true appetite for physical gold does seem to have landed. Just what would be happening to gold prices if that weight of demand were coming from the US or Europe?