Gold, a sparkling investment mantra
By Zhang Fengming |
July 6, 2011, Wednesday
|
Print Edition
Print Edition
LIU Zhifei said he's never regretted investing in gold coins because he believes gold has a glittering future and there are good returns to be made, especially in limited-edition commemorative coins.
"I went into the market five years ago, after some of my friends told me that I should consider investing in gold and silver coins if I wanted to ensure a comfortable retirement," said the 30-something white-collar worker from Shanghai.
Liu was lucky in his timing. Gold prices have more than doubled since mid-2007 as investors sought the precious metal as a safe haven amid the global financial crisis.
Gold price has risen 5.2 percent this year, continuing its longest rally in at least nine decades. The debt crisis in Europe helped push gold futures in New York to a record US$1,577.57 an ounce on May 2. The precious metal was trading at about US$1,493 yesterday.
The high price hasn't dented gold's allure for the Chinese. China has become the world's biggest investment market for the precious metal.
Annual growth
Gold demand in China has averaged 14 percent annual growth since the market was deregulated in 2001.
China's demand for bullion bars and gold coins in the first quarter more than doubled from a year earlier to 90.9 tons, according to the World Gold Council. Gold jewelry demand jumped 21 percent to a quarterly record of 142.9 tons.
Small wonder then the four-day Jewelry Shanghai 2011, one of China's biggest exhibitions of its kind, drew a record 700 jewelers from around the world when it was held in mid-June. It boasted 1,100 booths.
Coveting gold is nothing new in China. Since ancient times, the precious metal has been associated with good luck and storage value. It is considered to be the color of emperors.
Gold is a traditional gift for newborn babies, for birthdays and for the Chinese New Year. Most gold jewelry sold in China is 24-carat, or 99.9 percent pure. That's in contrast to the preference for 14-carat or 18-carat gold in some Western countries.
Demand for gold jewelry in China has more than doubled in the last seven years to 451.8 tons in 2010.
Analysts remain bullish on gold demand in China as domestic buyers ignore near-record prices and flock to bullion as a hedge against inflation and as a safe haven in a troubled world.
"We are still bullish on gold prices in the medium- and long-term because of strong demand for the metal in China," said David Leung, chief investment officer of wealth management at Standard Chartered Bank China.
China's currently high inflation rate - a 34-month high of 5.5 percent in May - is adding impetus to the gold market, creating an aura of a safe haven for personal wealth.
Still, despite the yellow metal's dizzying rise, some economists point out that its performance is not necessarily all that impressive on an inflation-adjusted basis.
Chinese buyers aren't fussed about such nuances when faced with curbs on property acquisition, a lackluster stock market, tighter credit and bank savings rates that are below inflation. Against this backdrop, Jung Ulrich, chairwoman of global markets at JPMorgan, said gold remains a preferred investment channel for many Chinese.
Real estate sector
"Credit-tightening measures in the real estate sector have triggered a shift in investment," she said. "Gold investment demand has risen rapidly, especially for gold bars and coins."
The gold fund under Lion Fund Management Co is the best-performing mutual fund in the country, with an investment return of 6.49 percent so far this year. The fund is the sole gold fund operating under China's qualified domestic institutional investor program.
The World Gold Council continues to cite China as an engine for global gold demand.
"We believe that Chinese gold demand could double within the next decade," the World Gold Council said. "However, given the recent momentum in Chinese gold demand, we would not be surprised to see this result achieved in a shorter time-frame."
HSBC said it expects gold prices to average US$1,500 an ounce in 2012, up from a previous forecast of US$1,300. The average price forecast for this year was also raised to US$1,525 from US$1,450.
"We remain positive on the metal going forward," said James Steel, an HSBC metals analyst. "An ill wind blows good for gold."
Steel said gold prices will be determined largely by the interplay of momentary policies, inflation expectations, commodity prices, the persistent sovereign debt crisis in the eurozone, concerns about United States debt levels and fiscal policy, and geopolitical risks.
However, Standard Chartered's Leung warns that the end of the US Federal Reserve's quantitative easing program last month could lead to a rebound in the US dollar and eat into gold prices.
Liu, the white-collar coin investor, said he still believes in gold's long-term prospects.
"I think buying under US$1,400 is safe," he said. "The recent bull run of the gold market may leave investors like me at risk of possible future price corrections. That's why I tend to buy coins with limited edition or supply."
Liu bought a series of Olympics Games coins in 2008 at close to 10,000 yuan. Today they are worth 12,000 yuan. He said the premium isn't as much as he expected because the supply of the coins is relatively big.
He quoted another investment he made in half-ounce gold coins commemorating Chinese painter-master Chang Dai-chien. He bought them for 7,000 yuan apiece in May 2010 and their price has since quintupled.
"By and large, I still believe in gold's future," Liu said, exuding supreme confidence.
"I went into the market five years ago, after some of my friends told me that I should consider investing in gold and silver coins if I wanted to ensure a comfortable retirement," said the 30-something white-collar worker from Shanghai.
Liu was lucky in his timing. Gold prices have more than doubled since mid-2007 as investors sought the precious metal as a safe haven amid the global financial crisis.
Gold price has risen 5.2 percent this year, continuing its longest rally in at least nine decades. The debt crisis in Europe helped push gold futures in New York to a record US$1,577.57 an ounce on May 2. The precious metal was trading at about US$1,493 yesterday.
The high price hasn't dented gold's allure for the Chinese. China has become the world's biggest investment market for the precious metal.
Annual growth
Gold demand in China has averaged 14 percent annual growth since the market was deregulated in 2001.
China's demand for bullion bars and gold coins in the first quarter more than doubled from a year earlier to 90.9 tons, according to the World Gold Council. Gold jewelry demand jumped 21 percent to a quarterly record of 142.9 tons.
Small wonder then the four-day Jewelry Shanghai 2011, one of China's biggest exhibitions of its kind, drew a record 700 jewelers from around the world when it was held in mid-June. It boasted 1,100 booths.
Coveting gold is nothing new in China. Since ancient times, the precious metal has been associated with good luck and storage value. It is considered to be the color of emperors.
Gold is a traditional gift for newborn babies, for birthdays and for the Chinese New Year. Most gold jewelry sold in China is 24-carat, or 99.9 percent pure. That's in contrast to the preference for 14-carat or 18-carat gold in some Western countries.
Demand for gold jewelry in China has more than doubled in the last seven years to 451.8 tons in 2010.
Analysts remain bullish on gold demand in China as domestic buyers ignore near-record prices and flock to bullion as a hedge against inflation and as a safe haven in a troubled world.
"We are still bullish on gold prices in the medium- and long-term because of strong demand for the metal in China," said David Leung, chief investment officer of wealth management at Standard Chartered Bank China.
China's currently high inflation rate - a 34-month high of 5.5 percent in May - is adding impetus to the gold market, creating an aura of a safe haven for personal wealth.
Still, despite the yellow metal's dizzying rise, some economists point out that its performance is not necessarily all that impressive on an inflation-adjusted basis.
Chinese buyers aren't fussed about such nuances when faced with curbs on property acquisition, a lackluster stock market, tighter credit and bank savings rates that are below inflation. Against this backdrop, Jung Ulrich, chairwoman of global markets at JPMorgan, said gold remains a preferred investment channel for many Chinese.
Real estate sector
"Credit-tightening measures in the real estate sector have triggered a shift in investment," she said. "Gold investment demand has risen rapidly, especially for gold bars and coins."
The gold fund under Lion Fund Management Co is the best-performing mutual fund in the country, with an investment return of 6.49 percent so far this year. The fund is the sole gold fund operating under China's qualified domestic institutional investor program.
The World Gold Council continues to cite China as an engine for global gold demand.
"We believe that Chinese gold demand could double within the next decade," the World Gold Council said. "However, given the recent momentum in Chinese gold demand, we would not be surprised to see this result achieved in a shorter time-frame."
HSBC said it expects gold prices to average US$1,500 an ounce in 2012, up from a previous forecast of US$1,300. The average price forecast for this year was also raised to US$1,525 from US$1,450.
"We remain positive on the metal going forward," said James Steel, an HSBC metals analyst. "An ill wind blows good for gold."
Steel said gold prices will be determined largely by the interplay of momentary policies, inflation expectations, commodity prices, the persistent sovereign debt crisis in the eurozone, concerns about United States debt levels and fiscal policy, and geopolitical risks.
However, Standard Chartered's Leung warns that the end of the US Federal Reserve's quantitative easing program last month could lead to a rebound in the US dollar and eat into gold prices.
Liu, the white-collar coin investor, said he still believes in gold's long-term prospects.
"I think buying under US$1,400 is safe," he said. "The recent bull run of the gold market may leave investors like me at risk of possible future price corrections. That's why I tend to buy coins with limited edition or supply."
Liu bought a series of Olympics Games coins in 2008 at close to 10,000 yuan. Today they are worth 12,000 yuan. He said the premium isn't as much as he expected because the supply of the coins is relatively big.
He quoted another investment he made in half-ounce gold coins commemorating Chinese painter-master Chang Dai-chien. He bought them for 7,000 yuan apiece in May 2010 and their price has since quintupled.
"By and large, I still believe in gold's future," Liu said, exuding supreme confidence.
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