Escalation of China Gold DemandLear Capital: Escalation of China Gold Demand
It seems breaking news regarding escalating Chinese gold demand ishaving a hard time keeping up with the pace in which Chinese gold demandis escalating. Everywhere I turn it seems that topic headlines much ofthe breaking gold news. I found something, though, that may put alittle different perspective on the topic.
It's been about 4years since China relaxed rules for gold ownership by its citizens. Atthat time, reports estimate the size of the middle class population ofChina was 18% of its total - about 180,000,000. Evidence shows it isthe middle class that is purchasing gold at the behest of government toprotect against the devaluation of foreign currencies.
Today thatnumber is estimated to have risen to 230 million which may well accountfor China's fivefold increase in gold imports throughout the first 10months of this year. Here's where it gets interesting. The size of themiddle class population is expected to rise to 600 million by 2015.That's 100 million people per year. If each of those newly dubbedmiddle class buys just one ounce of gold next year, that amounts to morethan 300 tonnes of new gold demand. At today's prices that amounts toan additional $140 billion.
Last year, Chinese gold imports camein at 45 tonnes. Compare that to 209 tonnes in the first 10 months ofthis year and you see one big reason gold prices are up over 27% so farin 2010. I am sure it is safe to conclude that even without a new batchof middle class making their way to prosperity, China gold demand willgrow regardless. This just adds to the pressure.
And if thisisn't enough to evidence why
the gold bull market has longer legs than aVictoria Secret Angel, consider this statement found today in another
Bloomberg article highlighting Chinese gold demand.
"Chinashould consider adding to its gold reserves as a long-term strategy topave the way for the yuan's internationalization, central bank adviser Xia Bin wrote in the China Business News today."
AsI pointed out in yesterday's article, a shift of just one percent ofU.S. Household assets to gold would bring an additional $422 billion ofdemand to the gold market. We've already gone through periods where theU.S. Mint has had to announce they are out of gold. Look for similarannouncements in days or months to come.
https://www.ibtimes.com/articles/20101203/lear-capital-escalation-of-china-gold-demand.htm