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China Consuming More Gold than World Produces

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374 metric tons of gold were withdrawn from the Shanghai Gold Exchange (SGE) in the first 6 weeks of 2015. During the same period, about 300 tons of gold were newly mined in the entire world. Using these figures, China is currently consuming more gold than the world is producing.

15 02 23 Golden-New-Year-Goat-2015 copy

The surge in Chinese gold consumption comes from preparations for the Chinese New Year celebrations, which began last week. Gold is one of the most traditional gifts to give during this holiday, but it’s not the only product the Chinese buy. They spend astounding amounts of money during this celebration: $100 billion in 2014, which was twice what Americans spent during the Thanksgiving and Black Friday holiday weekend.

China is extremely secretive about how much gold it officially imports, forcing investors to look at other data points to get a sense of how much gold is going into China. Analysts used to look mainly at Hong Kong gold exports to China, but the Chinese government has been slowly opening more avenues of importing and exporting precious metals. Withdrawals from the SGE are seen as an increasingly important metric for judging Chinese gold demand.

Frank Holmes, CEO of US Global Investors, has written a new commentary that puts into perspective just how giant Chinese gold demand currently is, and why it’s going to get bigger.

What’s not so well-known—but just as amazing—is that China’s supply of the precious metal per capita is actually low compared to neighboring Asian countries such as Taiwan and Singapore.

The World Gold Council (WGC), in fact, calls China ‘a huge, relatively untapped reservoir of gold demand.’

This might all change as more and more Chinese citizens move up the socioeconomic ladder. Over the next five years, the country’s middle class is projected to swell from 300 million to 500 million—nearly 200 million more people than the entire population of the United States.”

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