Monday, April 11, 2011

Ordinary Mainland Chinese Going For Gold As Inflation Hedge

According to a report in Xinhua, ordinary mainland Chinese citizens are going for gold as an inflation hedge in a big way.
"I want to buy some gold to protect my wealth from inflation," Feng Chun, a shopper in her forties said while trying to pick one gold bracelet amid the crowded counter at Caishikou Department Store, the largest gold dealer in downtown Beijing.

Counters of the gold dealer were swarmed by people who were eager to purchase gold bullions, as well as platinum, jade, diamond and other precious jewelry.

"Gold is small in size and good for collectible purposes. Moreover, it can help expel evil spirits and bring good fortune to my house, according to Chinese culture," Feng said....
A less picturesque reason is savings accounts yielding a negative real return, even before any taxes. Inflation is expected to keep going up, to well above 5%. Accounts yield only 3.5%

The picture the article portrays, of people lining up to buy gold, would actually set off an alarm bell were it North American buyers doing so. Huge lineups at gold shops is one of the contrarian signals that indicate the long-term bull market is about to top out. In mainland China, though, the picture is skewed because there's a lot of official encouragement to buy gold.

No comments:

Post a Comment