China: Gold’s Biggest Producer and Soon, Its Biggest Consumer

Over the last few years, China’s insatiable appetite for gold has become legendary—leading some analysts to coin a term called theBeijing Put. The Beijing put refers to China’s unending demand for gold—which can rise in price, but cannot fall very far down because of Chinese buyers at all price levels. While gold is a traditional cultural desire for Chinese, they also use it as a hedge against inflation, a store of value for it citizens and its central bank, and as a way to insure against financial calamity. An article in the latest LA Times characterizes buying gold as a double edged sword—a way for newly wealthy Chinese to show off their wealth and as an investment vehicle. 
“A bit player only a decade ago, China has emerged as one of the most important forces in the global gold market, helping fuel the rising value of the precious metal.”
“Already the world’s largest producer — it overtook South Africa in 2007 — China is now bedecking itself in bling. It’s on track to become the globe’s largest consumer of gold as early as this year, knocking off India — whose elaborate wedding dowries kept it on top for years.”
In 2011, China’s demand for gold hit a mind-bending 770 tons—no small feat considering China didn’t even have a real gold market prior to 2002. With China on pace to pass India, it is becoming clear that China will play an enormous role in this precious metals cycle. 

Categories: News mix

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