Chinese investors dive into gold bars and coins

The increase in the Gold price since the beginning of this year can largely be attributed to a new upturn in the Chinese gold market. And this time it is not jewellery for which people are queuing, but the gold bars and gold coins produced in large volume. When the Chinese buy gold, they traditionally do so in the form of jewellery and preferably during the Chinese New Year, but in recent months it has mainly been investment gold that the Chinese turned their piggy bank for.

A Hong Kong gold dealer told the Wall Street Journal that the past few weeks have been exceptionally busy. In fact, more gold was sold in the first three weeks of March than in the entire month of February. And that month was not bad because of the Chinese New Year and the strong upward trend in the gold market.

In particular, the demand for 250 grams gold bars has exploded in recent weeks, as noted Padraig J. Seif of Finemetal Asia. The sale of these gold bars, which change hands for just under €9,000 each at the time of writing, has increased tenfold in recent weeks. But the larger gold bars of 1 kilogram were also sold 50% more than before.

Gold bars and coins as a safe haven

Chinese savers and investors Buy Physical Gold in the form of bars and coins, because they give a greater sense of security. In the summer of last year, the Chinese stock market crashed, while the real estate market is also overheated. And because Chinese people can't easily invest abroad, they opt for gold, which has managed to retain value for centuries.

The increased demand for gold in China is also reflected in the rising premiums. Whereas the Hong Kong gold market used to pay a premium of $0.40 to $0.50 per troy ounce, now it is $1 to $2. The shift from jewellery to investment gold is also visible in the figures of the World Gold Council. In the fourth quarter of 2015, demand for coins and bars increased by 25% compared to a year earlier, while demand for jewellery fell by 1% in the same period.

Whether the gold price will rise further in the coming months depends on a large number of factors, such as the monetary policy of central banks, geopolitical tensions in the Middle East and sentiment in the global stock markets.