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Published: August 25, 2009
There is probably no group of buyers more
watched and coveted than Chinese consumers. Over the weekend,
the Financial Times had a piece that highlights things
the Chinese like to buy.
This is important because the Chinese are becoming increasingly
affluent in large numbers. Total consumer spending in China was
$1.7 trillion in 2007, compared to $12 trillion in the U.S. But
that number is growing rapidly. The Financial Times
focused on the new rich. China now boasts more millionaires than
the U.K. The rapid growth of this group has companies all over
the world spending more money and time figuring out ways to get
in their pockets.
So what do the affluent Chinese like? Outside of ordinary things
like flashy cars and booze and quirky things like ivory and
dried seahorses, one thing was mentioned in the Financial
Times piece that caught my eye: The Chinese love gold.
“China loves gold in all its
forms,” the Financial Times
reports, “as a reserve currency,
jewelry, an investment.” I’ve
mentioned in the past about how the
Chinese central bank doubled its
holdings of gold this year, but it’s
more widespread than that.
The rising middle class in China
also buys a lot of gold. Since 2007,
Chinese consumers have been the
second largest purchasers of gold
jewelry in the world, behind only
India. The Financial Times
points out those gold sales were up
+28% year-over-year in May. Total
gold demand for the year was up
+21%, to 400 million tons. There are
not too many sales of any kind going
up that much in this financial
crisis, but there it is.
The financial crisis and weak stock
market have helped gold as people
look for a place to park some money.
I think gold will remain a good
place to be for some time yet. And
gold stocks have the stars lined up
for them. Many are reporting falling
cash costs, yet the price of gold is
staying up here in the $900s -- and
is likely headed much higher. That
means gold stocks are reporting good
increases in cash flow, among the
few sectors to do so.
-- Chris Mayer
Contributor
DailyReckoning.com Editor's Note: This
article originally appeared in
Daily Reckoning. |
