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Chinese Banks And 100,000 ‘Outlets’ Selling Gold!!

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Bloomberg Television’s “On The Move Asia” had a fascinating interview with Albert Cheng, the World Gold Council’s Managing Director, Far East. He discussed China’s gold market and what’s driving the country’s demand with Rishaad Salamat.

Since 2003, we have pointed out how China’s liberalization of its gold market would have enormous ramifications for the global gold market in terms of a huge new source of demand and would ultimately lead to higher prices in the long term.

Bloomberg interviewed GoldCore nearly two years ago in May 2012, about the huge growth in demand in Asia and particularly China,  and we commented that this Chinese demand was a ‘paradigm shift’: “We could be witnessing a paradigm shift from China on bullion demand.”

We pointed out “that the gold market was liberalised in China in 2003 and prior to that gold ownership was banned in China by Chairman Mao.  The per capita consumption of 1.3 billion Chinese consumers, investors and central bank demand are very significant.” Please click here to listen to the interview on the paradigm shift that is Chinese gold demand.

Albert Cheng reaffirms the paradigm shift for the gold market that is Chinese gold demand. He points out two very important facts hitherto not known by market participants.  First is that there are now over 100,000 gold bullion dealers selling coins and bars in China. Secondly, he says this suggests that the majority of banks are now offering gold bullion products over the counter.  

The interview is very interesting and is well worth a look.

 Gold in U.S. Dollars - 1 Year - (Thomson Reuters)

Albert Cheng: China became the number one [gold] consumption country last year and people are starting to ask, would this be sustained? [The World Gold Council report] shows that in the next four years, [Chinese gold demand] is going to increase by another 25 per cent. And the reason for that is that more and more middle class is coming on stream and people have money to spend.

Rishaad Salamat: But that's just the thing, more and more people are buying gold, but what's caused that change? You can say people have got wealthier but we saw China overtaking India where there's been a traditional demand for gold. That's not something that is traditional in China, is it? So what's driving things?

AC: I think that the key of this is investment demand. Six years ago you didn't see any investment demand in China. China opened up the investment market through banks and now literally any Chinese person can walk into a bank and buy gold products. And you look at the number of outlets where people can buy investment gold, gold bars, gold coins - there are a hundred thousand of them in China. If I make a comparison with America -- Starbucks, McDonald's and Subway together have only fifty thousand outlets. In China there are more than a hundred thousand outlets where you can buy gold. So, the availability of gold in China, in every city, is the main driver behind gold.

AC: Wedding jewellery consumption accounts for 40 per cent of jewellery consumption in China; there is about 300 tons of gold sold in jewellery form.

AC: When people buy 24-carat gold jewellery, which has a markup of less than 10 per cent if it's a popular item, 15 - 20 per cent if it's a more designer item, that is the reason why Chinese people buying gold jewellery in China is equivalent to buying a piece of metal. At the end of the day, this is a way for them to keep their money, to keep their wealth. If they want to sell it, there is always a resale price for this kind of pure gold metal.

So why China has become number one in the world is because if [people] want to save money China, there is not much alternative for them -- you either can buy property of you get into the stock market. But neither of those are very attractive at the moment to the Chinese investor. In the past few years we've seen more and more people buying gold jewellery as well as gold bars.

RS: You've got this forecast in that we've been talking about where there's a 25% gain in gold demand from China over the next four years. What are the risks here to this to the downside?

AC: We all know that China is undergoing a big economic transition from an export-driven economy to a domestic consumption economy. This year is a transitional year. With these changes there will be a lot of major disruptions to the economic life of people here, and again, the shadow banking issue, which the government has addressed, will have an effect on liquidity and it also may impact gold in the short term. Long term, if China gets on to a domestic consumption economy, it will be good for gold jewellery consumption. More and more people will be encouraged to move from rural areas into cities, the urbanisation process will continue and people who are getting rich will get into consumption of gold jewellery or buying gold bars. So short term we will see some headwind but long term, medium term, we see the gold market continue to grow.

The interview can be watched here.

 

Gold in Euros, YTD 2014 - (Thomson Reuters)


Essential Guide To Storing Gold In Singapore

 

 

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Wed, 04/23/2014 - 10:51 | 4686470 pirea
pirea's picture

"more middle class is coming on stream and people have money to spend"

False. When you buy gold you don't spend money, you save.

Wed, 04/23/2014 - 10:36 | 4686420 elwind45
elwind45's picture

Nobody believes the German gold story anymore including price

Wed, 04/23/2014 - 10:28 | 4686383 elwind45
elwind45's picture

The only way to understand the gold market is to be Chinese or hungry

Wed, 04/23/2014 - 10:16 | 4686334 elwind45
elwind45's picture

All talk! Pump and dump that's the shift in the paradigm? We call these shops pawn and loan where I reside! Stand by for the epic boast-athon season?

Wed, 04/23/2014 - 09:06 | 4686153 Fast Twitch
Fast Twitch's picture

Monthly, Weekly & Daily indicators are all syncing up nicely for the next bull run in gold. Well played by the East...

Wed, 04/23/2014 - 09:02 | 4686142 q99x2
q99x2's picture

Nice lips.

Wed, 04/23/2014 - 08:49 | 4686066 TGR
TGR's picture

We pointed out “that the gold market was liberalised in China in 2003 and prior to that gold ownership was banned in China by Chairman Mao.

Well, Goldcore, in that case you've done a Simon Black and pointed out fictitious information. It really doesn't take much to do a little research and you ought to for the sake of your 'followers', if not for people who actually care about accuracy when it comes to the gold market.

Gold market liberalization in China began in 1982 when it was made legal to own gold. Further liberalization came in around 2001-2002 (not 2003) when investment-grade bullion was made legally available. But it wasn't illegal to own gold from 1982-on, just there wasn't freely available bullion bars. Coins, jewelry, ornaments etc...legal.

Wed, 04/23/2014 - 08:16 | 4685992 Latitude25
Latitude25's picture

So where is the gold?

https://www.youtube.com/watch?v=GAoSj3pyEOw

The average 1%er owns 54 ounces.  Gold is unlike any other commodity in that the price can rise to ANY level to reflect the needed value in society becasue it is only used as a store of value and not consumed.

Wed, 04/23/2014 - 07:59 | 4685988 CheapBastard
CheapBastard's picture

Merikans take their money go to Walmart buy ribs, lard and beef while Chinese take their money and go to their bank and buy Gold.

Different cultures...

Wed, 04/23/2014 - 11:27 | 4686643 Dr. Bonzo
Dr. Bonzo's picture

Do you guys just make this shit up as you go along? Have you NOT heard about Chinese "ghost" cities? Or the deluge of Chinese in Hong King queueing to buy..... wait for it................. shampoo.

SMFH.

The Chinese ruling elite is awash in free cash. They're throwing at everything. E.V.E.R.Y.T.H.I.N.G. Yes. AND gold.

 

Wed, 04/23/2014 - 10:23 | 4686369 elwind45
elwind45's picture

Far far away that's the biggest difference?

Wed, 04/23/2014 - 08:47 | 4686101 nickt1y
nickt1y's picture

Chinese sheeple spend discretionary income on Gold. Amurican sheeple spend it on cheap Chinese crap / TVs.

Wed, 04/23/2014 - 11:33 | 4686676 Dr. Bonzo
Dr. Bonzo's picture

No, actually Chinese spend their "discretionary" income on expensive brand name crap you would definitely get into a fight with your wife over. LV purses, Gucci sandals and RayBan glasses to name a few. I saw a queue... a fucking LINE winding around the corner for milk powder. There are lines for SHAMPOO. In Korea they gang dried SEAWEED shops. Don't feed me this line of horseshit about what a fucking sages the chinese are with their money. They're just as fucktarded as anyone else going on a bender. Maybe more so because they seem more prone to follow "trends" than the average whitey.

The mythologizing of the retardation that is on display on the ground HERE in China by people is dumbfounding. Don't pick and choose your facts.

Wed, 04/23/2014 - 08:48 | 4686100 nickt1y
nickt1y's picture

I only hit the save button once ... I have posted here before. I know how this works ... really.

Wed, 04/23/2014 - 07:58 | 4685987 MaxThrust
MaxThrust's picture

The question here, is when the Global economy "resets" will they sell. I hope only internally.

 

Max

Wed, 04/23/2014 - 09:20 | 4685959 uno
uno's picture

thanks for pointing this out - some websites have lots of products, others just reference Shanghi exchange.  No shortage of jewerly shops with gold - not sure of their markups

here is a page from argriculture bank of china:  http://www.abchina.com/cn/FinancialService/Gold/Products/EntityGold/

china construction bank has less detail products: http://www.ccb.com/en/goldbusiness/20090616_1245117029.html

The Industrial & Commercial Bank of China (ICBC)

http://www.icbc.com.cn/ICBC/Personal%20Banking/Investment%20and%20Financ...

this is 3 of the 4 largest state owned banks in China, not sure about the regional ones having retail sales

Wed, 04/23/2014 - 07:29 | 4685925 Rogue Economist
Rogue Economist's picture

The Chinese are TOAST!

RE

Wed, 04/23/2014 - 07:26 | 4685919 philipat
philipat's picture

Which explains why the price of  Gold continues to decline on Comex, even with GOFO rates negative 6 months out and the lack of any supply? Wake me up when China is ready to buy 20K Comex contracts and stand for delivery..

Wed, 04/23/2014 - 08:08 | 4686004 GetZeeGold
GetZeeGold's picture

 

 

I swear I hit the button one time.

If Germany can't make one phone call and have it's gold back overnight....none of this is real.

Wed, 04/23/2014 - 08:45 | 4686095 Latitude25
Latitude25's picture

Consider this about German gold repatriation.

https://www.youtube.com/watch?v=PBEwXgUfbZ0

Wed, 04/23/2014 - 08:58 | 4686127 GetZeeGold
GetZeeGold's picture

 

 

Total BS......send them all the gold now overnight.

 

If they want to send half back next week.....they can go nuts.

 

Creating trust my ass.

Wed, 04/23/2014 - 11:16 | 4686591 philipat
philipat's picture

Of course. There IS no Gold. It's all gone to China. All the Western Gold has been Leased, Hypothecated and Re-Hypothecated many times over. THe physical Gold is all already in China...

Wed, 04/23/2014 - 09:08 | 4686162 Latitude25
Latitude25's picture

He admits that the gold may not be there.  He analyzes the possibilities which is a fair thing to do.  That is why it is not total BS.  I disagree with him and believe like you that corruption has cleaned out all of the gold.

Wed, 04/23/2014 - 09:12 | 4686167 GetZeeGold
GetZeeGold's picture

 

 

The time for analysis is over.....it's now time for proof.

Wed, 04/23/2014 - 09:17 | 4686183 Latitude25
Latitude25's picture

That will never happen unless forced.

Wed, 04/23/2014 - 08:05 | 4686003 GetZeeGold
GetZeeGold's picture

 

 

Wake me up when Germany get's ALL of it's gold back.

Wed, 04/23/2014 - 11:30 | 4686442 philipat
philipat's picture

Remember my friend that the Bundesbank is also a Central Bank. The push to get back a very small proprtion of it's Gold was as a result of German Political pressure. At the end of the day, the CB's are all playing the same game with PM's. We know that and THEY know that. And they WANT us to know that so that we never get the idea that buying Gold MIGHT be proitable, more than Fiat. God forbid,

What I still don't get is why would any sensible trader become a counterparty to the BB's?Fed on the Comex when they (Should) know that they are being screwed??

That suggests, does it not, that the Comex is just a giant circle jerk with paper between the BB's, backed by The Fed, to manipulate the price of PM's. The rotaing paper (Fiat) losses are refunded by the CB's who can just print money to cover any losses.

Ultimately, we believe that this game will end. BUT it has been going on for many years, and we do all have to admit that we have ALL lost a lot of Fiat by being in PM's over the last few years? That doesn't mean that I will reduce my stack at all. Just sayin...

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