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Young Chinese spurn traditional investments in favour of gold

Published Dec 05, 2023 06:16PM ET Updated Dec 05, 2023 06:26PM ET
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3/3 © Reuters. FILE PHOTO: Gold ornaments are seen displayed for sale at a Chow Tai Fook jewellery store in Shanghai, China November 27, 2023. REUTERS/Nicoco Chan/File Photo 2/3
 
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By Casey Hall and Amy Lv

SHANGHAI/BEIJING (Reuters) - Gold buyers in China are getting younger, as a property market downturn, weakening stocks and currency and low bank deposit interest rates have left them with dwindling options to save for rainy days in a sputtering economy.

The trend underscores heightening uncertainty about growth prospects in the world's second-largest economy, which has not recovered from COVID-19 lockdowns as fast as consumers and job hunters had expected.

"The employment market has not been very good," said Linda Liu, 26, who works for a pharmaceuticals company in Beijing, but worries about job stability. "Buying gold makes me feel better."

"I want gold jewellery instead of diamonds for my wedding."

China is the world's top buyer of physical gold and analysts say this year it has been an increasingly important driver behind a rally in global spot gold prices, which hit all-time highs on Monday.

Analysts expect Chinese demand for the safe haven metal to remain high as economic growth grinds lower in coming years and foreign investment outflows weigh on the yuan, while the property market is still looking for a bottom.

"Incomes are not really appreciating, real estate is not really appreciating, the stock market is not really appreciating," said Jacques Roizen, managing director of consulting at Digital Luxury Group in Shanghai.

"Gold is a little bit of a unicorn in this environment."

Gold and silver jewellery have been among the best performing consumer goods in China this year, with a 12% rise in value year-on-year in January-October, outpaced only by garments, according to the latest retail sales data.

A Chinese consumer survey released by jewellery firm Chow Tai Fook in late October found 70% of consumers aged between 18 and 40 intend to purchase pure gold jewellery.

While China has long been a top global consumer of gold jewellery, Chow Tai Fook Jewellery Group (OTC:CJEWF) managing director Kent Wong said that traditionally, customers in China have been older.

"We've found people aged 18 to 24 have started to buy gold jewellery, and we were very surprised by this," Wong said.

Chinese social media discussions about steady gold accumulation abound, with users recommending small jewellery and marble-like gold "beans" as small as one gram that could be purchased even by those with low incomes for 450 to 550 yuan ($63 to $77).

Beijing student Nadia Qi, 21, has spent as little as she could of her pocket money on daily necessities while spending more than $2,000 on gold bars and jewellery so far this year.

"The only thing that I can trust and makes me feel relatively safe now is investing in gold," said Qi, who plans to buy at least 20 grams a year for rainy days. "The deposit rate is way too low, and investing in the stock market is too risky."

The one-year deposit rate at major Chinese banks ranges from about 1.5% to 1.8% and has declined in recent months.

China and India, the world's two biggest gold buyers, together account for more than half of total global demand.

In China, gold trades at a premium to the global spot price. That spread has been $25 to $35 per ounce in the past week, down from a record high of $121 in mid-September, but still above its usual $5 to $15 range.

Office worker Yang, 38, from the central Hunan province, is not discouraged by the rise in gold prices, arguing "the yuan has been depreciating, financial investment is too risky ... and the property market remains disappointing."

"There are not many choices left," said Yang, who only gave her surname for privacy reasons. "Gold is like hard currency, and this is especially true in the face of mounting geopolitical uncertainties for the moment."

($1 = 7.1424 Chinese yuan renminbi)

Young Chinese spurn traditional investments in favour of gold
 

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