TO buy or not to buy? Donna Pang felt as indecisive as Hamlet as she stood in a gold merchant's shop on Shimen No. 1 Road in Shanghai, contemplating the purchase of Year of the Tiger investment-grade bullion bars due to hit the counters on December 8.

The 28-year-old white-collar worker was caught in that classic investment quandary: price versus value. The tiger bars are selling at a record 282 yuan (US$41.29) a gram, or US$1,285 a troy ounce. Last year, when Pang bought a similar gold bar marking the Year of the Ox on the Chinese calendar, she paid 240 yuan a gram. While the Year of the Mouse bars was priced at 215 yuan a gram two years ago. The global gold price has soared about 45 percent in the last 12 months. But will it keep rising, she asked herself.

"You'd better make up your mind quickly because zodiac animals bars can easily be sold out," the saleswoman behind the counter warned. Pang demurred.

"I see the bars as holding their value," she said. "But I'm afraid of making a foolish investment at such a high price."

Some quick math told Pang that gold would have to rise above US$1,300 for her to make any profit on a tiger bar, after commissions and a premium charged if she sells it back to dealers.

Pang is among the rising tide of China retail investors who are drawn to the precious metal as a safe haven in uncertain times.

China, the world's second-biggest gold market by sales, is the only country that continues to show a growing appetite for retail gold products, after the global financial crisis nipped demand in developed countries.

Large stockpile

The spot gold price hit a record US$1,194 an ounce on November 26 before dropping back to as low as US$1,136.80 the next day in New York, after Dubai's debt problems sent shivers through all markets. It was quoted as US$1,170.40 in New York on Monday.

There's a big debate going on in global markets about gold's prospects. The bears say the metal is overbought and due to retreat in face of deflationary threats. The bulls see it heading higher amid a weak US dollar and inflation stoked by government stimulus spending.

Dealers in China, who have stocked up on the zodiac gold bars in anticipation of hot sales, will be trying to steer consumers to the latter viewpoint. They are betting that people won't be put off by high prices as year-end bonuses fatten wallets.

China Gold Coin Co, the zodiac bars issuer, increased its stocks of the bullion by 23 percent this year to 3.98 tons.

"The quota in Shanghai was sold out within one week on November 20," said Lu Hui, sales manager of Shanghai Gold Coin Investment Co, the city's wholesaler of the zodiac bars. "The high-flying gold prices didn't affect sales at all even as supplies grew."

"Indeed," he added, "rising prices pushed dealers to make quick decisions because the later they buy, the more they pay."

China Gold Coin is not alone in basking in the yellow metal's sheen. China National Gold, which accounts for about a fifth of gold output in China, also is profiting from the boom.

China National Gold's sales revenue in Shanghai so far this year has grown fivefold from a year earlier to 300 million yuan. The company has forecast revenue will at least double in 2010.

"We are falling over ourselves to further tap the market," said Li Qingfei, general manager of the Shanghai branch of China National Gold. "One thing is for sure - revenue will keep rising. The only uncertainty is whether it will double or triple."

China National Gold has sold about 200 kilograms a month of its buy-back "wealth bars" in Shanghai this year, while nationwide sales total about 2.4 tons a month.

Jewelers like Shanghai Laofengxiang Co and major banks like the Industrial and Commercial Bank of China have expanded into bullion sales, hoping to cash in on rising demand.

In China, retail investment demand for gold rose 38 percent in the first three quarters this year to 77.1 tons. In the same period, jewelry demand gained 7 percent to 372.8 tons, the World Gold Council said.

While China's lust for gold goes unabated, consumers and investors in the United States, the United Kingdom and Japan are cutting their retail gold purchases because of weak economic outlooks.

Gold can be a volatile commodity. The precious metal rose above the key technical level of US$1,000 last February, then tumbled to about US$890 in late March. By June, it was back up close to US$1,000. It began its most recent surge in early November after India surprised by the world by scooping up 200 metric tons of the 403 tons offered for sale by the International Monetary Fund. India paid an average US$1,045 a ton.

Sri Lanka and Mauritius were also buyers as some countries sought a hedge against a falling US dollar. Central banks will remain net buyers in the year ahead for the first time in more than two decades, Standard Chartered Bank said in a report last month.

"Gold is well positioned, given its strong inverse relationship with the US dollar, central bank buying, and continued investment inflows," said Dan Smith, a metals analyst at Standard Chartered Bank.

"We continue to favor the upside for gold. Global liquidity remains ample, helping to boost the whole commodities complex and keeping the US dollar under downward pressure," Smith said.

Bumpy outlook

Standard Chartered Bank said it expects gold to trade at an average of US$1,300 in the fourth quarter of 2010 on a weakening dollar.

Industrial Bank senior economist Lu Zhengwei is less certain about gold's prospects, expecting it to hold its ground this year but doubts it will rise further in 2010.

Lu said gold may break US$1,200 this year against a weak US dollar because the US Federal Reserve is unlikely to raise interest rates. However, 2010 may be a bumpier ride for bullion, he said.

"The rising gold prices may have already been over-factoring expectations of a weak dollar, making the precious metal vulnerable to a correction in 2010," Lu said.

Glenn Maguire, Societe Generale's Asia chief economist, said investors may shift their focus from the yellow metal to platinum and palladium as good investment options. The white metals are a key component in making cars, where China's market is rising steadily.

Despite her dithering, Pang said she will probably end up buying a tiger bar this year.

"With the stock market bumpy and real estate far beyond my reach, I have to seek other channels to diversify my assets, and gold is certainly an inevitable option," she said.