ET:Record gold prices spawn new wave for gold bars in China
SHANGHAI: Record gold prices, rather than denting China's enthusiasm for bullion, have emboldened investors to plough more money into gold bars and riskier bullion-based derivatives.
August is traditionally a slow month for Chinese jewellers, but many shops in Shanghai visited by Reuters reported surprisingly solid gold sales over the last few weeks, with shoppers unfazed by gold's stellar price gains over the past few months.
"The surge in prices has sparked another gold-buying craze. The 50 gram and 100 gram gold bars were selling like hot cakes," said Ms. Liu, a store manager at Shanghai's major jeweller Lao Feng Xiang Co Ltd , who said gold sales this month were up at least 30 percent from a year ago.
The attitude of Chinese consumers -- expected to soon overtake Indians as the world's top buyers of gold -- will be an important influence on longer-term trends.
Demand from the world's most populous country, which is adding hundreds of thousands of people to the ranks of affluent and middle-income consumers every year, implies that the long-term price floor for gold is set for a steady increase.
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That demand may also help smooth out temporary drops in prices. Spot gold has come off its record highs of over $1,900 an ounce hit last week, falling back to around $1,820 an ounce, but such dips appear only to embolden consumers.
"Many Chinese investors and consumers see price corrections as buying opportunities. The view that gold is an enduring store of value is firmly rooted in Chinese cultural traditions," said Hou Xingqiang, a gold analyst at Jinrui Futures.
"Gold's rally over the past two years and the debt worries in the West have only strengthened Chinese investors' belief that they need to own the metal as an investment asset."
There is no shortage of bulls on Wall Street forecasting even higher gold prices, with J.P Morgan predicting at least $2,500 an ounce by the end of the year.
Amid the gold frenzy, China's banks and brokerages have been quick to offer paper gold investments to cash in on the trend.
