George Chen, who writes under the name “Mr Shangkong”, reported that “Chinese media in Hong Kong and Shanghai reported that more people than usual rushed to local jewelry shops to buy gold bars” in response to reports of a historically-sharp price fall, “causing some shops to run out of stock within just one or two days”.
While in percentage terms, Monday’s 9% loss was the biggest since 1983, and almost double the loss on Friday, Chen added, “retail investors in Hong Kong and mainland China ignored warnings” that the price could fall to as low as $1,200 an ounce, “when they saw gold shops packed with consumers buying all kinds of gold products”.
“In Shanghai, some commercial banks have asked their wealth management product teams to call their clients to promote and sell gold-linked investment products this week,” Chen went on, citing two individuals whom he didn’t identify but who, he said, had reported receiving such calls.
‘Chinese love gold’
One reason the Chinese are willing to ignore the recent fall in the price of gold elsewhere in the world, Chen notes, is because they "do love" it.
"It is traditional for the older generation in China to buy gold products for the younger generation as gifts for various occasions, for example, when their children get married and have babies," he noted.
"From that historical point of view, it’s no surprise that Chinese consumers will buy gold when they see prices fall.
"Some analysts even joked that this time the war on gold prices may be a war between those big Western institutional investors, like leading asset manager George Soros, and Chinese retail investors, including many local housewives."
On Tuesday, gold fell further in Asia, to a two-year low of $1,321 an ounce, although there were reports the price was stablising in western markets as the day went on.
Speculation
As gold continued to fall on Tuesday, many experts in Europe were pronouncing their opinions as to whether the sell-off would last.
Among those who seemed doubtful it would was Mike Turner, head of global strategy & asset allocation at Aberdeen Asset Management, who called the “fall from grace” of the metal “arguably puzzling”.
“Developed market countries remain mired by huge levels of debt and anaemic growth. Even in the relatively buoyant emerging markets the rate of economic expansion has slowed,” Turner said.
“In such uncertain times, one would think gold would be regarded as a safehaven.”
HSBC Private Bank’s investment committee seemed to shared Turner’s general outlook, saying, in a bulletin on Tuesday afternoon London time, that it foresaw “a gradual improvement of prices in the medium term, albeit from a lower base”.
Global liquidity “should help inflate asset prices and support the case for real ‘hard’ assets, such as gold”, the committee added – lending weight, it would seem, to the investment instincts of Mr Shangkong’s Chinese goldbugs.
To read Mr Shangkong’s column in the South China Morning Post, click here.
