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BIZCHINA> Top Biz News
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China bats for bullion in uncertain times
(China Daily/Agencies)
Updated: 2009-10-09 08:15 Higher prices expected While investors abroad warn $1,000 per ounce might not be sustainable, many in China are more confident. "Just because the price is high they will not suddenly start selling," said China Gold Association Vice-Chairman Hou Huimin. "There haven't been any big changes in behavior in China." With demand still considerably higher than supply, there is room for more price increases, said Ellison Chu with Standard Bank in Hong Kong. "We will see how this price level will affect the market but personally I think it can go higher. If the market gets used to this price level, I think it has the potential to move higher." Longgold's Yao said China's gold investors had already climbed on the bandwagon and, in the absence of attractive alternatives, were reluctant to jump off. "The herd mentality plays a big role in the Chinese investment market," said Yao. "I don't worry about rising gold prices hurting people because Chinese people pursue products whose prices are rising." Further price support was likely to come from the Chinese government, which is expected to increase its gold reserves in the near future, Yao added. Chinese investors have fought hard for the right to trade in new financial instruments and they are not likely to panic-sell their gold as a result of the price surge, Chu said. "If you look at the stock market in the last few months, there has been volatility and rumors, and people are looking for something more stable. They can expect continuous growth in gold. I think it is a good way for them to invest." Currency devaluations, dramatic cuts in interest rates and the threat of inflation have made gold one of the few attractions left in China.
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