The potential Chinese Gold Market will now be reached

This week GM’s Chinese operators there announced a 300% profit. Such growth in the car market evidences the growth in disposable income.   Within a decade we expect 2/3rd of China to be living in cities and earning far more than they are today. Their savings will go into the main banks and attracted to the products available for investment. To date investment choices have been extremely limited with straightforward savings leading the way. Carefully tailored gold products may well be attractive to such people.

New gold products will have to be tailored to the banking/savings environment and for home consumption. The branches of this bank reach into the far corners of China and will bring an existing distribution system to the world of gold, there.

This project has the potential to ‘mature’ the gold world in China and help to raise the per capita gold holding from the lowest in Asia [at 0.26 grams per capita] to close to the norm in places like Hong Kong.  This will involve at least a potential growth of up to 10+ times the present holding. Success will take the Chinese gold market on a rising slope from the current 347 tonnes annual demand to the world’s main gold market, overtaking India [peak – 850 tonnes] in the medium term [we think less than 5 years – it took the gold Exchange Traded Funds three years to build to 1,300 tonnes].

In China there are already Yuan, US. $, Yen, AU $, HK $, € deposit accounts so a ‘gold’ account at the local branch is a small extension for the saver there [thanks Professor!] in your regular local bank savings account.   We could see Chinese gold Exchange Traded Funds too, but the average saver in China is not a financial product/stock exchange knowledgeable individual, so simply understood products will lead the way.

Expect products that are bank controlled, lower purchasing costs, held in the bank for the investor. The main client base will likely be an existing I.C.B.C. client.  Gold demand will, therefore, grow in line with the growth of these towns and cities and the Chinese Middle classes. Just extending current growth levels into the future tells us such gold account growth will be dynamic and rapid.
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