The latest gold rush occurred due to a number of factors. Increasing trend in gold trade in developing economies especially China and India was the one of the chief factors that propelled gold to new heights. The decline of gold last year could have been even worse if it were not for voracious appetite for gold in China.
The country imported a record 1,108 metric tons of gold in 2013 eclipsing India as the largest importer of gold. Here we look at the significance of gold in Chinese culture. We look at reasons for the unquenchable thirst of gold in China.
Importance of Gold in China
Gold plays an important part in Chinese art and culture. Gold is associated with good luck and fortune. Chinese emperors used to adorn themselves with gold colored clothes and accessories to signify that they possessed all the wealth in the world and were at the top of the world.
The significance of gold in China can be gauged by the fact that Chinese language contains a plethora of metaphors that comprise of the word gold. Gold mouth (precious statement), gold head (intelligent person), gold appearance (good quality), gold nest (luxury house), gold promise (solemn promise) are some of the metaphors that signify the importance of gold in Chinese culture.
During festive seasons, people give gifts of gold to each other to show their respect to their loved ones. The Chinese New Year that also marks the arrival of spring festival is one of the occasions that trigger great demand of gold in China. People buy gold for their loved ones to show their importance in their lives.
Besides the Chinese New Year and Spring Festival, there are various other occasions where Chinese people buy gold for themselves and their relatives. Some of these festivals include Lantern Festival, Qingming Festival, Dragon Boat Festival, Double Seventh Festival, Mid-Autumn Festival, Double Ninth Festival, and Winter Solstice Festival.
Can Demand for Gold Sustain Gold Prices?
Booming economy in addition to the increasing middle class has fueled the demand for gold in China. In the last five years, the Chinese gold market has blossomed from being a shadow of the market to becoming one of the largest gold importing countries.
A number of fabricators, wholesalers, jewelers, and gold dealers have cropped up in Shenzhen and other areas of China that deal with buying and selling of gold bullion, bars and, jewelries. Some Wall Street analysts suggest that burgeoning Chinese demand for gold will be the number one strongest supporter that will not only sustain but also lift the price of gold.
The rally of gold in the first half of this year along with the surge in gold price during the later part of last year was solely due to increase gold trading in China. Although, western investors are liquidating their precious metal investment for index related funds, Chinese on the other hand are snapping up the gold due to their low prices.
The West is more focused on stocks and bonds; the East on the other hand relies on physical gold. It is interesting to see how the two opposite poles will play their part in the future in keeping gold at stable prices.
