Chinese Demand For Gold "Explosive"

Tyler Durden's picture

According to an executive of Industrial and Commercial Bank of China, the world's largest bank by market value, demand in China for
physical gold and gold-related investments is growing at an "explosive"
pace and its appetite for the yellow metal is poised to remain robust
amid inflation concerns, reports Reuters. In other words, what was previously repeatedly reported on Zero Hedge, and by the World Gold Council, is starting to be appreciated by everyone else. Yet in a market in which supply and demand are completely disconnected from price discovery thanks to global central planning, and courtesy of precious metal price suppression by JPM, China investors are able to accumulate gold and other non-dilutable metals at prices that no longer reflect surging global demand. And just like in the US, China is also starting to fall for physical substitute investments: "There is also frantic demand for non-physical gold investments. We issued 1 billion yuan worth of gold-price-linked term deposits in 2010, but we managed to sell the same amount over just a few days in January this year," Zhou said, adding that such deposits would easily exceed 5 billion yuan ($759 million) this year." Although in China, unlike in London, these deposits may actually have real coverage behind them.

From Reuters:

ICBC, the world's largest bank by market value, sold about 7 tonnes of physical gold in January this year, nearly half the 15 tonnes of bullion sold in the whole of 2010, said Zhou Ming, deputy head of the bank's precious metals department on Wednesday.

"We are seeing explosive demand for gold. As Chinese get wealthy, they look to diversify their investments and gold stands out as a good hedge against inflation," Zhou told Reuters.

Gold imports into China soared in 2010, turning the country, already the largest bullion miner, into a major overseas buyer for the first time.

The surge, which comes as Chinese investors look for insurance against rising inflation and currency appreciation, puts the country on track to overtake India as the world's top gold consumer and a significant force in global gold prices.

Gold prices jumped 30 percent in 2010 and struck an all-time high of $1430.95. Spot silver surged 83 percent last year and is currently hovering at around $30 per ounce.

Zhou said China's gold demand could grow at a stronger pace this year compared with 2010, as a choppy stock market and moves by Beijing to rein in property speculation and purchases means more investors will pile their cash in bullion investments.

"Unlike the property market, investment in the gold sector is something the government is encouraging," he said.

Beijing has encouraged retail consumption and announced last August measures to promote and regulate the local gold market, including expanding the number of banks allowed to import bullion.

"China has a centuries-long cultural attraction to gold and because we have started at such a low base, I think demand growth will likely stay strong for quite some time," he said.

Oh yes, silver too

Zhou said there was also voracious demand for
silver, with the bank selling about 13 tonnes of physical silver in
January alone, compared with 33 tonnes in the whole of 2010.

Not surprisingly, China is doing all it can to offload bubble frenzy to its billion plus consumers:

The bank on Tuesday launched its second physical gold investment product, which sells gold bars to investors, which can be resold for cash through ICBC based on real-time gold prices.

The WGC said ICBC's introduction of this gold investment could lift China's gold retail investment by 10 to 15 percent in 2011 from about 170 tonnes last year.

For those who think gold is already in a bubble... check back in 1 year.

h/t Papa

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william the bastard's picture

I am not a Turd but I took his place in line on a gold thread.

unwashedmass's picture


please. you are such foolish peasants.

of course we should give away our gold.....if we don't JPM will not only have to forego bonuses, they might die.

so could you all get real -- if this country has to go down to take care of Jamie Dimon and the four or five next generations of his family in luxury beyond imaging...

so be it.

it is only right that we should give to the gods and our betters.

ZeroPower's picture

Yet silver has been outperforming gold YTD.

Go figure right.

(Not in gold but would like to be, am long SIVR)

raya123's picture

Gold and silver will basically go straight up until April, and will not hit a peak until June or July... POG will be around $1550 to $1650 at that time.

Misean's picture

"demand in China for physical gold and gold-related investments is growing at an "explosive" pace"

So is the price of food. Fortunately gold isn't in the Chinese CPI, so no adjustments are needed.

youngman's picture

It is not being projected in this last months prices....but I think along with others that China is shorting...and buying GLD and asking for delivery....they will steal as much as they can before the cat is out of the bag....all I read is how China, Vietnam, Central banks, are buyers....but the price is pretty low....go thinks this next month in Comex is going to be a doosey....where the pedal hits the medal...

DosZap's picture


Yes, and the smart little farts are now doing the same thing to SLV.

Great, suck up all you can.I am ready for a rocket ride.

Scarlo's picture

Ha, we'll see. I'm putting my money on either a near term double top, downwards to another round of consolidation before heading up again, or working on a handle to this cup.  Either way, LT bull still in place until it's not. But, I'd be very surprised to see us bust right through the highs already - although I've been surprised before and surely will be again.

topcallingtroll's picture

sometimes consolidations after big moves can take 18 months even in a bull market.  I think you may be right.  Unless things really are about to blow up gold should consolidate for a while longer.

topcallingtroll's picture

sometimes consolidations after big moves can take 18 months even in a bull market.  I think you may be right.  Unless things really are about to blow up gold should consolidate for a while longer.

Ragnarok's picture

Volatility in PMs today.

gwar5's picture

Excellent, I just read that article. Gold looking good.

China is at least protecting themselves and their people by empowering them, and telling them to buy gold. and silver to protect themselves. Unlike our criminal government and banking cabal which are content to steal from the little people through relentless debasement.

If it wasn't for the communist Chinese I might not know what my own government is doing.

SilverRhino's picture

>>China is at least protecting themselves and their people by empowering them

On the surface it appears that way, but consider that a forced confiscation of silver and gold via a Chinese declaration of a strategic metal would be MUCH MUCH easier than in the USA.  

I would not say that China is empowering its citizens, it is leveraging THEIR purchasing power with an intent to eventually confiscate.  


cougar_w's picture

The Chinese have been playing this kind of game a looooong time. The last time they were in this neighborhood they built the Great Wall in response. Of course they didn't have 1.2 billion stomachs to feed at the time...

Cleanclog's picture

Many in China remember extreme controls only a generation ago.  There is a reason beyond ornamentation that jewelry (gold, gems, coins and other elements of value) has long been worn and gifted during good times and hidden for emergencies during bad times.  These same assets have had currency status for a much longer time than any paper currency.  The Chinese aren't stupid, and their memories are more realistic than the USA.  Just ask people in the Balkans.

RobotTrader's picture

Not near as explosive as the auto sector.

There is an explosion in auto dealer stocks, Group 1 and AutoNation among the top % gainers the last two years, vastly outperforming anything gold-related.

AN, GPI, etc.

TRW, BWA and other auto parts suppliers have also had absolutely monstrous runs.

tmosley's picture

I guess you missed the part where Chinese auto sales were down 10% YoY last month.

Or are you just playing the retard today?

JonNadler's picture

playing the retard today?

grok's picture

I was about to say the same thing.

lieutenantjohnchard's picture

and of course the old catfish mouth "it's not hard to make money trading" - no wait - "it's a jungle out there to survive in trading" robu uber bull bear wannabe has profited nicely on said auto stocks. he saw the potential early, jumped on board, and now is up nicely. my hunch is he'll sell within a tick from the top.

silver's down a dime, robo. it's about time for you to start schooling gentleman jim sinclair again.

tmosley's picture

Whoops, too late.  That ship has sailed.  Silver now approaching $31.

luk427's picture

Best time to cash out, when everything looks too good to be true. I'll stick to PM's thanks

Oh regional Indian's picture

Bubble bubble

Toil and trouble.

This desire of the Chinese government to encourage somethign fo rth egood of their people somehow stinks to the highest heavens.


Hearst's picture

Silver the most used industrial 'commodity' world wide second only to oil is still in the low double digits per oz!  How long do these bankster cocksuckers think they can continue to keep this metal this cheap?  Palladium over $800 per oz, Platinum over $1800 per oz.  Silver $30 per oz!  Does the Silver price reflect the greatest imbalance of any 'commodity' price of all time?

tmosley's picture

I'm as much of a silver bull as anyone, but silver is NOT the second most used commodity.  You are forgetting most of the other metals, foodstuffs, wood, hell, even secondary materials like polyurethane pellets.

Compared to those, silver isn't used much at all.  Of course, this is why silver can explode to the upside so strongly, simply because they don't use much and they HAVE to have it.  For now, at least.  Graphene and carbon nanotubes will replace many of it's roles eventually, but that is years away at least.  

gdogus erectus's picture

I think he's referring to the oft quoted fact(?) that silver is used in the most NUMBER of products after oil.  Just happens to be trace amounts versus the massive bulk of petroleum that is used for plastics, makeup, fuel, etc.

Dr. Richard Head's picture

Perhaps the Chinese want to eat the gold since plastic rice and cardboard pot stickers just don't have the right flavor.

Internet Tough Guy's picture

Gold appears to be in backwardation.

DoChenRollingBearing's picture

Being in Costa Rica now (hah!), I have no way of knowing if that is true.  If it IS true, then Fekete predicts the physical would very quickly dry up if gold in backwardation for any length of time over say few days.

Got your gold yet?

RagnarDanneskjold's picture

If Bank of America was selling gold products to the mass market and demand was this high, would you be looking for higher highs, or would you think a top was in? If you knew that in China, gold and houses are both "good" investments? There are bloggers who criticize the government and mainstream economists for pushing housing and gold, who expect deflation will come to China with another Asian crisis. If there was a Chinese zerohedge, they would be on it.

I own gold because I think sovereign risk is great. But Chinese demand is artificially high due to inflation. You are looking at peak or near-peak demand from China, IMHO. Now, after the citizens have all that gold and the price drops, I'm sure the Chinese government, which controls the big state banks such as ICBC, will offer to buy that gold at favorable prices...

gall batter's picture

If BOA were selling gold products, I'd have the gold tested before I'd purchase.  I have more to say about this but I'm too distracted by Amy Calistri's hat.  

Math Man's picture

Bingo.  Chinese demand has peaked due to their inflation problems.

Expect more rate increases, more increases in bank reserves, and maybe even a slight devaluation in the Yuan in the next few months.

None of that will be good for Gold demand.

Cookie's picture

My 'old Asia hand' prognosis is as follows;

Over half the world's population in Asia.

Half of them in poverty or near it, but many millions breaking into middle class.

Asians have not been duped yet, they still trust PMs more than banks.

Fewer Asians can afford to invest in gold than just 1 year ago, silver is the next choice.

This trend is magnified as gold prices rise.

Gold will go up, but silver will go up more, and not only for these reasons.

Scarlo's picture

I'm more interested in what happens if/when BIS declares it will use gold to settle international forex transactions. Will gold be outlawed for all common peasants?  Will there be a common price, which is completely different from the price used by the BIS?  Likely only "registered" BIS constituents will have access to their pricing. FOFOA has me thinking... where's this going?...

oddjob's picture

When have the Eurotrash rottenchild not tried to screw everyone over?...nothing new here.

luk427's picture

Nice volume on silver futures today.

nontaxpayer's picture

All paper will burn.

Johnny Lawrence's picture

Good day for the Cobra Kai.  Family Dollar, Gold, Silver.  This dojo is rocking.

alangreedspank's picture


I don't get why would people would have an 'explosive' interest for something that is at an all time high. Don't get me wrong, silver for example @ 20-25 I'd load the boat, but 31 ? I'll pass.


JonNadler's picture

and did you ever load the boat? no right? AT 18 you said, silver at 10 I'd load the boat but at 18, I'll pass...