Chinese investment in Gold to grow by 10%

"Investors here want to hold part of their assets in gold to hedge for the risks, especially now that the financial crisis has evolved into a sovereign crisis," Zheng Zhiguang, general manager of the precious-metals department at Industrial and Commercial Bank of China Ltd., said in Shanghai last week.

China will best India this year as the largest Gold Bullion market as rising incomes bolster demand, the World Gold Council forecasts.

Gold will likely gain for a 12th year in Y 2012 as European policy makers strive to avoid a breakup of the Eurozone and the US Federal Reserve adds stimulus to aid the economic recovery in the US.

Investors in China, facing lackluster equity markets and property curbs, are looking more to the precious Yellow metal, Zheng said.

"It's necessary for individual, institutional or even government investors to hold gold when the value of money is decreasing at a time of possible quantitative easing or excessive money-printing practices," said Zheng.

Investment demand in China was a record 98.6 metric tons in Q-1, 13% higher the same period in Y 2011, according to figures from the producer-funded council.

Last year, it rose 38% to 258.9 tons compared with Y 2010, as overall demand gained 20% to 769.8 tons. China's total Gold demand may reach 1,000 tons this year, the WGC said.

China has allowed investors to buy and hold Gold only in recent years, "there is explosive, pent-up demand because the Chinese have an attachment to Gold," said Zheng, predicting that growth in investment demand will beat the expansion in jewelry sales. "There's great potential for expanding China's physical Gold investment market."

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.