As gold continues to solidify its position as a number one safe haven for investors globally, when the crisis in the Euro Zone is far from over, India and China are the two nations that continue to stoke up the demand for physical gold. If India is the proverbial elephant when it comes to buying gold, China is very much the dragon that dominates. Both these countries have traditionally been the largest buyers of gold because in both nations, owning gold is not just looked at from an investment purpose it is also considered a symbol of good luck.
Buying Gold for Good Luck
During any special occasion in these countries buying gold is considered auspicious and people sure like to display their gold jewellery when it comes to social gatherings during happy occasions. It is therefore considered to be a symbol of prosperity. According to World Gold Council, the slump in the equities markets world over and the subsequent rise in the prices of gold have not dipped the demand for gold from India and China.
Despite a 25 per cent per cent rise in the price of gold, the demand for physical gold has gone up by about 7.5 per cent thanks to India and China. Though India continues to buy gold at a heady pace, recent reports suggest that China has in fact become the largest consumer of gold in recent times. It is not like their love for gold jewellery has seen a sudden spike. The reason why China is buying gold is because they want a proper hedge. It is the same reason why people buy life insurance policies. It makes them feel secure.
Chinese Leading the Demand for Gold
Though the Chinese have a lot of dollars in their foreign exchange reserves, they seem to be sceptical now about the future of greenback given the recent turbulence in the currency markets. Anticipating the worst, the Chinese have been shoring up their gold reserves. With over 10,000 tonnes of gold in their vaults (that has incidentally seen a rise of nearly 75 per cent over the last five years) China is the fifth largest owner of gold reserves.
But this is not where it ends. The Chinese authorities have been encouraging retail investors to shore up their personal gold reserves. The Chinese government is known to be encouraging its people actively to buy gold. In fact they recommend that 5 per cent of their income should be spent in buying gold.
India too is not very far behind, though it is a large consumer of gold buying gold is restricted only to the top 40 per cent of household who a wealthy. The majority of the population cannot afford it. In order to address this issue, Indian post offices have been roped in for gold schemes that are affordable for people in the salaried class. This is expected to give a much needed shot into the arm of the retail consumption of gold in India. This is post offices still have the largest reach in rural areas that are still untapped.