Mr. Shangkong | When it comes to the gold price war, bullish Chinese consumers can't wait to buy
Sales are up in Mainland China and Hong Kong as price of gold falls
While people in the United States and Europe are selling gold in panic, apparently it’s a very different story in the east.
As the price of gold bullion tumbled another US$125 per ounce on Monday in its biggest-ever daily loss, some retail investors in Hong Kong and mainland China considered this a rare opportunity for them to boost their personal gold reserves. Chinese media in Hong Kong and Shanghai reported that more people than usual rushed to local jewelry shops to buy gold bars causing some shops to run out of stock within just one or two days.
In percentage terms, Monday’s 9 per cent loss is the biggest since 1983 and was almost double the loss on Friday. Some investment banks, for example CLSA, estimated the price of gold could fall to as low as US$1,200 per ounce, but retail investors in Hong Kong and mainland China ignored such warnings when they saw gold shops packed with consumers buying all kinds of gold products.
If the price (in Hong Kong) falls a bit more, I will go and buy a ring for my wife
In Shanghai, some commercial banks have asked their wealth management product teams to call their clients to promote and sell gold-linked investment products this week, according to two individuals who received such promotional calls from their banks respectively.
“The salesperson just tells me on the phone that he thinks the gold price has been low enough so I should go to the bank and buy some gold products. He describes now as a very rare opportunity to buy gold,” said a retired local man in Shanghai who only wanted to be identified by his surname, Shao.
Historically speaking, Chinese people do love gold. It is traditional for the older generation in China to buy gold products for the younger generation as gifts for various occasions, for example, when their children get married and have babies.
From that historical point of view, it’s no surprise that Chinese consumers will buy gold when they see prices fall. Some analysts even joked that this time the war on gold prices may be a war between those big Western institutional investors like leading asset manager George Soros and Chinese retail investors, including many local housewives. It’s all about how much Chinese investors can take and how much gold will hit the market for sale.