Little Old Ladies in China Buying Gold

Little old Chinese ladies are buying gold.

The South China Morning News (a Hong Kong paper) reported that mainland China imported five times more gold from Hong Kong in May. Recently released customs data showed imports from Hong Kong primarily grew due to cross border shipments to meet mainland customer demand.

Many of those customers are little old ladies, according to the paper:

Jasper Lo, chief executive of King International, said many mainlanders, especially ‘Big Mother’ investors – elderly ladies who like to invest in the metal – were major buyers of gold, which has risen in price by 28% this year, up 6% in the last three weeks.”

Gold traders say they expect the Chinese investors will continue to buy gold as the year goes on. According to Lo, economic volatility and uncertainty are driving gold demand on mainland China:

The gold rally started in the beginning of this year due to the many uncertainties about US interest rate rises, the Brexit and the dispute over South China Sea sovereignty between mainland China and the Philippines. These uncertainties have seen gold become a safe haven for investors…Mainland Big Mother investors…have one more reason to invest in gold – it is a good hedge for the falling value of yuan. When many expected the yuan would continue to devaluate further this year, this led the Big Mothers to invest in gold instead.”

The yuan has fallen more than 3% against the dollar this year and many Chinese economists believe the currency will continue to devalue in the near future due to China’s poor economy.

The Japanese are also pouring into gold and storing it overseas. Many analysts believe investors fear the yen will eventually collapse under negative interest rates and more aggressive Japanese central bank monetary policy.

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American investors might want to note the Chinese and Japanese flight to gold, and its relation to currency devaluation. Peter Schiff has predicted that the Federal Reserve will ultimately sacrifice the dollar on the altar of the stock market. In order to maintain the stock market bubble, the Fed will have to lower rates and engage in another round of quantitative easing, eventually precipitating a major currency crisis:

I think that the government, the federal reserve, their main goal is to make sure that the stock market doesn’t collapse again, to make sure that the real estate market doesn’t collapse again. And they may succeed, but only by sacrificing the dollar. And so we’re going into a currency crisis and this crisis is going to be much bigger than a financial crisis.”

With this in mind, it might be worth considering following the lead of the “Big Mother” investors in China.

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