In China: The Gold rush continues

Imports of the precious metal reached 209 tonnes

• The trading volume up 43%

In China, imports of the yellow metal could be multiplied by six this year. Gold is seen as a refuge against inflation. Its success reflects the opulence of the new affluent classes. The obvious conclusion is to read the figures recently reported by Shen Xiangrong, president of the Shanghai Stock Exchange. According to him, China's imports of the precious metal reached 209 tons during the first ten months of this year. That compares to 45 tons imported in all of 2009. The appetite of the world's factory for raw materials is a key player in the world. However, despite the dramatic increase of its reserves, the Chinese ogre is still wise in gold. The Middle Kingdom wants to increase its reserves, but the monetary authorities are aware of the impact of their purchases of gold on his recovery. So first they seek to increase their reserves through their domestic production, not to cause a surge in gold prices. The global financial crisis has affected the behavior of investors, now anxious to preserve their heritage and to avoid excessive risk taking.
According to some projections, we now expect that 2010 ended with a sixfold increase in imports of gold from 2009. Investors are clearly looking for security, because the silver, palladium, or platinum, are also rising. There is international causes, including increased concern around the Korean peninsula and the euro area. But in the case of China, another factor intervenes: the surge in inflation. After rising 4.4% in October, a record 25 months, prices could slip even 5% in December, if we are to believe a recent study of Bank of America-Merrill Lynch. But for Beijing, this is potentially worrying drift politically, since the priority penalizes the poorest households. Measures to slow the economic machine, and including blocking bank lending, have thus succeeded in recent months. At touchdown the Shanghai Stock Exchange, after several months of enthusiasm, has entered a phase of doubt in mid-November.
Furthermore, the Shanghai Stock Exchange, trading volume on gold is up 43% over the first ten months of the year, but 247% if we focus exclusively on transactions for behalf of individuals. A craze that also reflected the new wealth of some Chinese classes. Which affects all kinds of markets, some of which may seem unexpected.