Gold no slam-dunk sell in China as aunties pounce

Yang Cuiyan, a 41-year-old housekeeper from Anhui province, is one reason China is poised to topple India as the world’s top consumer of gold (COMEX:GCZ13) even as investors desert the metal.

Standing outside Beijing’s busiest jewelry store, wearing a thick coat against the autumn chill, she clasps a gold necklace that cost her 10,000 yuan ($1,640), or five months’ wages.

“I don’t know anything about the stock market and I don’t have enough money to buy property, so I figured gold is the safest choice,” she said. “I can put it on when I go back home to show everyone that I’m doing well.”

Yang, who made the 650-mile (1,000-kilometer) journey to the capital from her rural home to visit relatives and shop, is one of the legions of middle-aged Chinese women, respectfully referred to as aunties, who bought coins and jewelry this year, bringing support to a market shunned by many professional investors who began doubting the metal as a store of value.

Bullion consumption in the world’s second-largest economy will surge 29% to a record 1,000 metric tons in 2013, according to the median of 13 estimates from analysts, traders and gold producers in China surveyed by Bloomberg News. Demand that may ease 2.4% in 2014 from this peak still points to purchases greater than any other nation and more than the U.S., Europe and the Middle East combined.

China’s demand for jewelry, bars and coins rose 30% to 996.3 tons in the 12 months to September, while usage in India gained 24% to 977.6 tons, according to the London- based World Gold Council. India was No. 1 for calendar 2012.

‘Slam Dunk’

Images in Chinese media of aunties clearing shelves in gold shops after a 14% plunge in prices in two days in April illustrate an appetite for bullion that defies the views of the biggest banks in the West and points to limited investment choices in China. Warren Buffett, the world’s most successful investor, said the metal has no appeal, and Jeffrey Currie, the Goldman Sachs Group Inc. commodities research chief who correctly forecast the rout this year, on Oct. 8 called it a “slam dunk” sell for 2014.

“In China, you look around and see very few places to put your money,” said Duan Shihua, a partner at Shanghai Leading Investment Management Co. “With the share market down and the government nudging people away from real estate, gold will remain a favored choice.”

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