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Why you should be interested in this emerging trend in the gold market

by , 26 June 2014

China is daft about gold. It's widely regarded as THE symbol of wealth in the country. People traditionally give gold on the birth of a baby, on birthdays, at Chinese New Year and at weddings. To give you an idea of the popularity of gold in China, the state broadcaster even shows adverts to encourage its people to invest in gold between TV programmes! So why should you care about this? And what does it mean for gold? Let's take a closer look…

A growing number of people in China want to invest in gold

The growing Chinese middle class wants to get their hands on gold. The World Gold Council says the number of Chinese middle class is around 300 million.

In just five years, this is expected to balloon to 500 million, Simon Popple in The Right Side explains.

To put that in perspective, the US ‘only’ has a population of 319 million, of which 163 million are middle classed!

The World Gold Council says that Chinese households have about $7.5 trillion in the bank. And they hold about $300 billion in gold.

There’s some solid evidence that the Chinese middle class is already converting their money to gold.

Gold commentator Koos Jansen’s numbers for gold demand in China (excluding the Chinese government) show the demand for physical gold soared 93% in 2013!

Gold demand is soaring in China

This shows that gold demand from China is on the up. Especially with this growing middle class. And what’s more important about this is it’s likely to trigger a major shortfall in gold.

It looks like it’s only a matter of time before demand outstrips supply.

According to numbers from the World Gold Council, gold supplied came in at 4,340 tonnes last year. Let’s assume the same for this year.

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If Chinese households consume the same amount of gold as they did last year, along with government demand, that totals 2,797 tonnes.

That leaves just 1,543 tonnes of gold for everyone else. And with this dwindling availability of gold, the price of gold is sure to rise.

It looks like it’s going to pay to keep a close eye on what the physical gold market is up to. With demand ramping up in China, it’s unclear where this extra gold will come from. But it should send the price of gold higher.

So there you have it, why you should be interested in this emerging trend in the gold market.

Why you should be interested in this emerging trend in the gold market
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