China’s appetite for Gold mirrors the old adage on Chinese take-out: No matter how full you may be now, wait two hours you will be hungry again. A little over a decade ago the Chinese government deregulated the purchase of gold. Since then China, the largest producer of gold, has grown to become a deficit consumer. The Hong Kong exchange alone demands more gold than the 321 tons produced last year domestically.
The talking heads vary on their opinions on how this will affect the global gold market. Some claim it will bring massive shortages in the coming years as China acquires more tonnage in the coming decade. While others shake this off as nothing more than the Central Bank of China (CBOC) anomaly of shoring up its banking through its gold holdings. We think that both are correct to a varying degrees. Yet, we tend to cling to the middle ground that China both privately & through the CBOC will continue to add pressure to the price of Gold based on demand.
Much like oil demand is greatly increased by the consumption of the growing Chinese industrial revolution. Gold will continue to see price pressure as demand ebbs and wanes in China. As no surprise to any, China is growing into a power-house economically that will continue to affect global markets, including Gold.