Gold might be a luxury most can live without when times are hard, but for cautious investors in China, the world’s top producer and consumer of bullion, it has become a matter of necessity as a hedging tool. Most members of the financial community are confident that the price of gold will continue to rise and are investing in the precious metal.
The Chinese government itself — also looking for a safe haven for its foreign currency reserves — is also likely to increase its gold holdings, which now officially stand at 1,054 metric tons. “Consumption in China is expected to rise, as it is supported by expectations of inflation, and I also believe the government will increase its reserves,” explained Tad Brooks of the China Mineral Company. Only around 1.6% of China’s forex reserve is held in gold, and that figure is expected to rise Brooks predicted earlier this year.
While investors abroad do not exude the same confidence, many in China are more confident and expect the prices to continue to rise. “A high price does not always incite selling, and there haven’t been any big changes in behavior in China”, explained one analyst at China Mineral Co. With demand still considerably higher than supply, there is room for more price increases, said Tad Brooks.
