We begin this week with an introspective look at China’s growing status as a gold hub. And if you’re looking for statistical analysis to prove the point, you’ve come to the right place. You may remember that the Chinese financial markets were rattled just a few short months ago, with a steep drop in value. In fact, the Shanghai Stock Exchange tumbled almost 40 percent in 10 weeks. In response, institutional and high net worth investors flocked to the traditional safe haven of gold.
Countries importing gold into China are on the rise. In the past, these gold imports typically came in through Hong Kong, but importers now bring the metal in from faraway places such as Switzerland, the UK and other countries. Since Shanghai opened new vaults in recent years, this gold enters the mainland through the Shanghai Gold Exchange (SGE).
Not to be outdone, the central bank of China has gotten in on the gold fever as well. In July, China’s central bank started reporting changes in its gold reserves after six years of keeping them quiet. The bank has been adding to reserves, and in September said its holdings stood at 1,693 tons, making China the fifth largest gold-holding nation in the world.
China is one of the world’s largest consumers of gold, and their demand is on a long-term uptrend. Demand is expected to improve this fall and winter, because of jewelry giving between the nation’s recent Golden Week holidays in early October and the upcoming Chinese New Year’s in February 2016.
In the last decade, Chinese gold production from its own mines grew at a faster pace than in other countries, making it tops in the world, followed by Australia. Chinese output, estimated at more than 462 tons last year, stays within its borders to meet both industrial and jewelry needs.
The growth of China as a gold hub can also be seen here in the United States. Recognizing China’s growth as a gold hub earlier this year, the Chicago Mercantile Exchange (CME) launched a physically delivered, kilogram gold futures contract, settled in Hong Kong at CME-approved locations. The CME noted that as gold demand swells in China and the Far East, the physical bullion market is, slowly but surely, moving eastward.