During this time of economic volatility, many people are looking for a safe haven for their money, with gold being seen as a good choice. But here in China, gold investments have only recently taken off. Our reporter Guan Xin finds out whether the gold is a safe bet for Chinese investors.
Mr. GAO has been investing for over 6 years. He decided to add gold to his investment portfolio a year ago, after the market began to drop. The Shanghai Composite Index has plunged to below 2,000 points since its peak of around 6,000 points last October. Meanwhile, the previously red-hot property market has also cooled significantly. Coupled with record high Consumer Price Index, these factors have driven investors like Mr. GAO, to look for safer alternatives.
Gao Chunming, one investor said "I entered the gold market after the stock markets began to fall. I felt gold was a good hedge against the economic slowdown and crisis. Gold prices have remained stable, despite the market's volatility."
Meanwhile, investing in gold has forced this investor, to adjust his life style somewhat.
Gao Chunming said "Gold is different from other investment tools. It has a close relationship with overseas markets. So I have to keep a close eye on the domestic market during the day, and the overseas markets at night. I also read a lot of news on the global economy and foreign analysis on gold investments."
These investors first forays into gold investment have proven to be fruitful. Gold prices climbed by over 30 percent in the single year of 2007. It then broke the 1000 US dollar benchmark in March. The Shanghai Gold Exchange also recorded a similar growth.
Xie Tian, staff of Trading Department of Shanghai Gold Exchange said "Gold prices jumped very quickly in early 2008. From the low of some 90 yuan per gram, it skyrocketed to 234 Yuan per gram this March. Gold always moves at a stable pace. In recent years, it has been on a steady upward trend. "
High risks lie in the unpredictable ups and downs of the markets. Since March, gold prices have been sliding, trapping many who bought in at higher value. Experts have different opinions on why gold prices have been slipping.
Liu Yuning, Senior Vice President of Jingyi Gold Co. said "Banks that were on the verge of a meltdown, like Lehman Brother, sold their high quality assets, including gold, in a bid to keep liquidity. That is the reason behind the slide."
Li Wenfeng, Trade of Huaxia Bank said "In my opinion, 3 factors have led to the drop. First, the U.S. dollar has been rather weak against currencies like the Euro and the British Pound for a long time. These currencies lost momentum after the subprime crisis broke out and their economies have remained flat. Secondly, gold prices recorded a sharp gain from 600 US dollars per ounce to 1,032 US dollars per ounce in March. It needed some adjustments. Finally, most of the commodities are losing steam this year, and gold is simply following the trend."
