The gold price popped up to a new high above 1060, after Monday’s holiday. It’s apparently become the favored speculative play in China:
“Chinese investors are [also] placing leveraged bets,” says Wei Gu, a blogger for Reuters in Beijing.
“Leverage is not allowed in China’s stock market, so people eager to maximize their returns have flocked to gold trading.”
The People’s Bank of China recently vowed to continue with what it called an “appropriately loose monetary policy,” holding interest rates at record lows.
Xinye Bank, which trades through the Shanghai Gold Exchange, grew its client gold dealing three times over during the first half of ’09, trading $3bn worth of contracts.
“Customers are allowed to borrow as much as 90% of the value of the gold contracts they buy,” says Wei.Noting that several large hedge funds and other speculative players are now seeking to buy physical commodities outright – and thus avoid the “position limits” imposed by US regulators on energy and raw material derivatives – “The gold price is available to show policymakers whether their monetary policy is appropriate,” writes Martin Hutchinson at Prudent Bear.”
That is interesting. (But when reading about China remember that rules are very flexible. We cannot interpret the application of regulations and law in China with the same precision as utilized in America.)
What is even more interesting in my mind is this: In China it is much easier to buy gold than the US. In all the major cities at every mall there are dozens of stores that sell 24k gold. You can buy bullion, coins or jewelry. Also certification is available for a very small fee.
The price of gold bullion and coin in the stores fluctuate daily and are posted in public; also, small amounts are sold so that anyone who can afford a cell phone can also afford to own gold.
The 24k jewelry is sold by the gram with a small fee for the artist.
Talking to Jewelers they laughed when I said in America it is difficult to buy 24k gold. They said nobody in China would buy anything less. However as China becomes more Americanized, I am confident they will do as we do.
For some reason, precious metal ownership is not as important in America as in other other countries. We buy jewelry because it is pretty and a famous brand hocks it on TV. They buy because it has certain value first, then because it is pretty.
In North Carolina, South Carolina, Texas and DC there is an incredible growth of “bling” junk gold stores in the malls. Large, gaudy, jewelry for the new generation of hipsters.
Sherwood Smith