Analysis of the Chinese Gold Demand - City Index
Jul 29, 2011, 09:00 ET
LONDON, July 29, 2011 /PRNewswire/ --
When forming a spread betting strategy, it is of paramount importance to understand your market and know what factors affect the price. With this in mind, spread betting and CFD trading provider City Index (http://www.cityindex.co.uk/) looks at the reasons for the recent Chinese gold demand.
Wealth
The World Gold Council believes a rise in the disposable income of the Chinese middle class also has a part to play in demand. This increase is likely a result of economic acceleration due to the reforms taking root in China. In 2005, just 15 million households in China had an annual income of more than $4300 per annum. According to China Consumer Daily, this figure is expected to reach 75 million by 2015.
Hedging
A global year-on-year increase of 11% in Q1 gold consumption is attributed by the World Gold Council to investment demand. With persistent high inflation levels in China, investors may view gold as an effective hedging tool.
Institutional Appetite
In its Q1 report, the World Gold Council states its belief that there is "a growing appetite among Chinese institutions to increase their asset allocation to gold investment". This belief is supported by news that Chinese institutional investors like China Investment Corporation (CIC) are allocating more money into gold.
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SOURCE City Index