China’s New Year Buyers Look To Gold As Stocks & Property Crash

(February 7, 2024 - The Business Times)

Sales of gold, silver and jewelry have been brisk for months, defying wobbles in the Chinese economy centered around the protracted crisis in the property market.

GOLD has never been more expensive in China heading into the Chinese New Year, but consumers are still finding lots of reasons to buy the precious metal.

While the holiday season usually drives increased spending on items such as jewelry, reports of robust demand this year are remarkable because the shopping season happens to coincide with a stock market crash. It is just the latest symptom of a loss of confidence in the economy that has weighed on consumer spending. But gold’s billing as a surefire store of value in times of trouble is finding new fans, including from younger buyers.

One shopper, who works in the Lujiazui financial district in Shanghai, said he spent a few thousand yuan this week buying a gold necklace for his girlfriend as a present for both Chinese New Year and Valentine’s Day, which both fall in the middle of February.

“I previously wanted to buy a necklace from a luxury brand, but on second thoughts I went for gold jewelry due to its investment value,” he said, giving only his surname, Zhuge.

Sales of gold, silver and jewelry have been brisk for months, defying wobbles in the Chinese economy centered around the protracted crisis in the property market. Retail sales in December, the last month for which data is available, were at a six-year high.

“The lack of alternatives, and the fact that it is become a lot more difficult than it was a few years ago to get your money out of China and invest elsewhere – I think that’s definitely helping gold,” said Nikos Kavalis, managing director at consultancy Metals Focus. “Demand is pretty decent, considering where the price is.”

Bullion on the international market is solidly above US$2,000 an ounce, and not far off its all-time high, bolstered by worries over conflict in the Middle East and the expectation that interest rates in the West will soon begin to fall. Prices are the most expensive they have ever been heading into the Chinese New Year period, according to MKS PAMP Group.

Moreover, as a major importer, gold in China typically commands a premium on top of world prices, while the yuan is relatively weak, further raising the cost of the metal for consumers.

Weak outlook

“The outlook for Chinese property and stocks is very weak,” said Zhang Ting, an analyst with Sichuan Tianfu Bank. “Investors are naturally moving to relatively conservative assets such as gold,” and jewellery sales should stay elevated for a while, he said.

The fact that consumers of such pricey items are still flocking to gold to preserve wealth is telling of how many people view the deterioration in economic conditions. But it is also a comment on how the industry is designing its wares to attract a new audience.

Gold jewellery – once seen as old-fashioned – is now drawing interest from a younger crowd, said Kavalis at Metals Focus.

Designs these days are much more edgy, said 28-year-old lawyer Christina Qi, who recently bought her husband a gold bracelet as a combined birthday and new year’s gift. Many of her friends have also bought similar pieces as investment items, she said. BLOOMBERG